USD: Hoping for some positive headlines from Canada - ING

Periods of data silence often serve as a useful gauge of the market's underlying bias in FX. So far this week, the tendency to add to USD short positions has been clear, even though the greenback remains notably undervalued against most G10 currencies when judged by short-term drivers such as rates and equity differentials, ING's FX analyst Francesco Pesole notes.

Moves above 100.0-100.5 in DXY may prove short-lived.

"Expect an intensification of headlines from the G7 meeting running in Canada until tomorrow. There is a low probability-high impact of any suggestions that the G7's longstanding commitment to allow free floating of exchange rates might be revised to allow dollar weakening. US Treasury Secretary Scott Bessent is set to hold several bilateral meetings in the coming days, and markets will be watching closely for any signals that currency agreements are on the table. If current speculation proves accurate - and the US is pushing for stronger trading partner currencies - it could not only prompt sharp appreciation in those currencies but also weigh on the dollar more broadly."

"Beyond this, other news from the summit is unlikely to hurt the dollar. While a broader push to end the war in Ukraine would have led to some dollar weakness until a few months ago, the greenback is no longer trading as a traditional safe haven. Incidentally, recent developments suggest that the US administration tends to dial down trade tensions after direct talks with other leaders, and any signs of de-escalation should provide some support for the dollar."

"Markets' inclination to sell the dollar in the rallies should remain, and moves above 100.0-100.5 in DXY may prove short-lived."