In trading yesterday, risk was subdued (though it did recover modestly) while the dollar was offered. So far today, we're seeing things move back the other way around. US futures are pointing higher but the greenback is also settling to be slightly higher across the board as well.
It's tough to make full sense of the flows in the market but one can argue that after the unrelenting move higher in the dollar in recent weeks, perhaps we were overdue for a breather as seen yesterday.
And despite the slightly better risk mood today, it doesn't take away from the fact that the past two months have been terrible for equities. For some context, the S&P 500 is still poised for a seventh consecutive weekly decline - barring a miracle run today at least.
All in all, there still seems to be some pushing and pulling in market sentiment as a whole.
In FX, central bank narratives are also partly balancing out the dollar's recent run perhaps. Let's take a look:
- More hawkish ECB talk starting to percolate, with Knot floating the idea of a 50 bps rate hike in July
- Japan inflation data could lead to the BOJ not able to exempt itself from the global tightening trend
- Highest UK inflation in some 40 years pressuring the BOE to do more on rate hikes
- SNB chief Jordan angling towards the idea that they might act on inflation if needed
- Canada inflation data guarantees a 50 bps rate hike by the BOC, need to be more aggressive
- Strong labour market report from Australia rebuffs a potentially more aggressive RBA
- RBNZ set to stick with a more aggressive tightening path, starting with a 50 bps rate hike next week
In particular, the potential turn in the SNB and BOJ are well worth noting while the push by ECB policymakers and pressure on the BOE are perhaps offering some resistance to the dollar's unyielding rally.
