USD: Sentiment fragile as German politics hits European equities - Scotiabank

Markets are generally quiet and G10 currencies are trading in a mixed fashion against the US Dollar (USD), with no clear overriding theme or risk tone as we head into Tuesday's NA session, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD is mixed vs. G10 currencies

"JPY, GBP, and SEK are outperforming with modest gains, while CHF and AUD are weak and MXN is down marginally. CAD, EUR, NOK and NZD are all trading flat vs. the USD. In Asia, markets have returned from week long holidays to relief over the stabilization in the TWD following a spectacular 13% rally from early April. The rally had generated some anxiety about the implications for other currencies in the region, most notably CNY/CNH and the risks around China's response. The PBoC has chosen to keep its CNY (onshore) reference rate steady and appears to be pushing back on recent CNH (offshore) strength."

"In Germany, incoming Chancellor Merz was unable to secure a parliamentary vote for his confirmation, casting a pall on the German DAX and European equity markets more broadly. The broader tone appears tentative, as US equity futures gently extent their pullback from recent highs. Asian indices were generally green in their post-holiday trade but the news out of Germany appears to have taken hold of the market narrative. In government bond markets, US 10Y yields are quietly consolidating around 4.35% while the German 10Y does much of the same above 2.50%. In commodities, the price of oil is recovering and WTI is climbing back toward $60/bbl after a short-lived dip to the mid-$50s."

"Technically, the candle charts show that WTI 'hammered' a low on Monday with a 'hammer doji' formation, typically seen as a bullish reversal candle. The price of copper continues to trade quietly at the midpoint of its recent violent range while gold is finding impressive renewed strength, likely buoyed by the uncertainty out of Germany as well as China's pushback against CNH (and broader Asian currency) strength. For Tuesday's NA session, the focus will be on the scheduled meeting between President Trump and PM Carney. The US data calendar is limited to trade for March (ahead of the US tariff announcement in early April). The Fed begins its two day meeting ahead of Wednesday's policy decision, a widely anticipated hold."