DXY inter-markets: losing momentum?

The US Dollar Index (DXY), which tracks the greenback vs. its main competitors, has managed to regain the positive territory around 95.50 today, reverting the initial drop to multi-day lows in the 95.15/10 band. The daily recovery has been fuelled by the cautious stance from the ECB at its meeting today, leaving the door open to further easing in case the picture deteriorates, even after revising higher its projections for inflation and growth in the region for the current year.

The index found decent support in the 95.10 area for the time being, although the extent of the current bounce remains dubious, to say the least: US yields along the curve are currently not supporting the recovery, with the 5y, 10y and 30y trading in multi-day lows, while Fed Fund Rates keeps pointing south since recent peaks in levels just shy of the 96.00 mark. In fact, according to CME Group’s FedWatch tool, the implied probability of a 25bp rate hike at the June meeting has retraced to just above 20%.

Furthermore, the S&P500 – a good gauge for risk appetite trends – seems to have stabilized in recent highs around the 2,100 level.

Anyway, tomorrow’s Non-farm Payrolls could probe to be crucial for USD-bulls and those who still advocate for a rate hike next month. Recall that consensus expects the US economy to have created 164K jobs during May.