Midday Update – Dollar Eases as Debt Ceiling Takes the Spotlight

An improvement in the market mood in the EU session acted as a headwind for the greenback. The market awaits the debt ceiling crisis to be discussed on Tuesday where expectations lie on raising the debt limit after talks were postponed on Friday.

USDCHF weakened on Monday as the dollar retreated from a five-week high. The Swiss Franc appreciated despite mixed producer prices data early in the European session. The Swiss Producer Price Index missed targets on a year-on-year basis at 1.0% vs 1.1%.

On a monthly basis, the PPI remained unchanged at 0.2% in April. The US economic file will feature Fed officials’ speeches where investors will gather clues on the Fed rate path. The pair sank -0.17% after bulls failed to take 0.9000, a 5-week high, with targets at 0.8950 on the downside.

EURGBP slumped -0.20% after March Industrial output data shrank more than expected. Month-on-month production slowed by -4.1% against an anticipated -2.5%, while the yearly read slumped to -1.4% vs 0.9%.

The sterling kept gains ahead of the country’s jobs data due on Tuesday where wages inflation will be a key focus for investors. Before that, BoE MPC member Pill will speak later in the day. The bears took over from the 0.8720 intraday high with a key target at 0.8650.

NZDJPY rallied by +0.74% as investors fret the Japanese Yen as a haven. The risk-sensitive New Zealand dollar benefited from the improved risk mood ahead of the highly awaited Chinese data. Data from the Bank of Japan showed that the Producer Price Index contracted to 5.8% from an expected 7.1% in April.

The pair rose after establishing a low at 84.00 on the day. Bulls may be capped at the 84.80-85.00 level while a break above may give buyers room to soar to 86.00.

European stocks traded higher amid a recovery in the market mood. The FTSE 100 rose +0.60% as bulls trim a 3-week losing streak, although the downside seems likely in the long term. CAC40 was up+0.38% sitting at the 7400 mark as buyers aim for 7500. DAX rose by +0.24% trading a few ticks away from a bullish cap at the 16 000 mark.

US stock futures appreciated on Monday on the possibility that President Joe Biden and Congressional lawmakers may agree to raise the debt ceiling at a scheduled meet-up on Tuesday. The US 500 futures were up +0.55% trading a few ticks away from the 4160 support-turned-resistance.

The US30 futures gained +0.56% as the rally may strengthen above 33500. US 100 futures soared by +0.49% caught in between 13 300 and 13 400 as bulls continue to aim for 13 600.

Elsewhere, gold rose early Monday lifted by the broad dollar weakness, although gains are limited. XAUUSD WAS +0.21% ranging between $2000 and $2020. An extended rebound may give buyers $2050. However, the downside may give up $1980.