Dollar Firms on Positive PMI Data, Euro Steadies After Being Under Pressure Due to Catalonia Worries 03-10-2017

Greenback in Technical Rebound; Long Term Outlook Bearish. The US dollar got boosted from Manufacturing PMI on Monday, but the longer term outlook still looking bearish owing to a number of factors. Even though the US economy looks pretty healthy, judging from GDP figures, there are other factors that influence the US dollar such as geopolitics tensions in the Korean peninsula and Fed decision to reduce its balance sheet. The Fed’s balance sheet had ballooned after it started buying bonds and mortgage-backed securities, now it’s going to simply stop reinvesting into these bonds on a gradual basis starting from this month as they mature. Investors are right to be cautious because interest rates will rise when the Fed stops buying these debt papers. This is the reason why the outlook for the greenback is still bearish.

The Euro Steadied After Sliding in Response to Violence-Marred Catalonia. The euro was steady at $1.1731 after sliding 0.7 percent against a dollar boosted by data overnight. The common currency took a knock on Monday as Spain faced its biggest constitutional crisis in decades after Sunday’s independence referendum in Catalonia.

Dollar’s Advance vs Yen Slows on Caution Before Japan Vote. The dollar was flat at 112.750 against the yen on Tuesday with its advance as traders considered the implications of Japan’s snap general election later in the month. Market participants try to hedge against currency risk and volatility through the use of risk reversals, in which “puts” give them the option to sell.

Gold Slips to 7-wk Low as US Yields Rise. Gold has fallen to its lowest in nearly seven weeks as rising US Treasury yields pushes the US dollar higher while concern over violence during Catalonia’s independence vote at the weekend weighed on the euro. Today’s downside move has resulted in gold prices breaking below critical price support at $1280 per ounce.

Oil Prices Fall on Oversupply Concerns. Oil edged lower on Tuesday, declining for a second day and sapping more strength from a third-quarter rally, amid signs that a global glut in crude may not be clearing as quickly as bulls had hoped. U.S. crude was down 0.3 percent, at $50.43 a barrel, Brent crude was down 0.3 percent, at $55.94 a barrel.

Watch Out Today for:

03:30 am GMT: AUD RBA Interest Rate Decision

08:30 am GMT: GBP Construction PMI

By MEX Group Team

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