S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico Market
ING’s Chris Turner sees the US Dollar (USD) underpinned by hawkish Federal Reserve repricing and a risk-off tone in equities ahead of key United States (US) Consumer Price Index (CPI) and Producer Price Index (PPI) data. With the Fed in blackout before the June FOMC, he expects limited pushback against tighter pricing and anticipates US Dollar Index (DXY) staying firm, potentially testing resistance around 100.25/65 as cyclical drivers dominate.
Hawkish repricing and tech-led risk-off
“At some point, that expected tightening will be too aggressive, but we cannot see that story being unwound this week. This is because it is another week for US price data, where the May headline CPI reading is expected to push through 4% year-on-year, and PPI final demand should remain near 6% YoY. We are now also in a Fed communication blackout period ahead of the 17 June FOMC meeting, meaning there is little to no scope for the Fed doves to push back against this pricing.”
“In fact, we see the dollar staying bid into that FOMC meeting, given the market expects the central bank to remove its implicit easing bias.”
“An unwind of risk assets and especially an unwind of emerging market positions is normally dollar-positive. This probably adds weight to US Treasuries as well, given that emerging market nations (and presumably Japan again sometime) will be liquidating Treasuries for FX intervention operations.”
“One further source of dollar selling this week could come from Korea’s National Pension Service. In exceptional times, it can increase its benchmark 15% hedge ratio on foreign assets and has said that it is doing so today.”
“DXY should stay bid and looks biased to test resistance in the 100.25/65 area. The dollar’s recent strength is a reminder that cyclical rather than structural factors continue to dominate.”
