USD: FX markets in holding pattern awaiting fresh catalyst - Scotiabank

Currency markets are generally quiet as we move into Tuesday's NA session. All of the G10 currencies are trading in a relatively tight range, with the exception of GBP as it underperforms on the back of a weaker domestic employment release. Markets are waiting for a catalyst as the US and China continue their second day of talks in London, and preliminary reports appear constructive, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD quietly consolidating as markets await resolution of US/China talks

"The holding pattern is apparent across most asset markets, as we note a tight consolidation in US equity futures at fresh local highs -- and just two percent shy of their record from mid-February. The US 10Y yield has pulled back modestly from the 4.50% level it had reached in the aftermath of last week's payrolls, and the German 10Y yield is fading back to the lower end of its recent range and drifting toward 2.50%."

"In commodities, oil prices are well supported as WTI ignores recent OPEC developments and concerns about Saudi-driven oversupply to extend its recovery above $65/bbl to reach fresh local highs. Copper prices are quietly consolidating at the upper end of their recent range as gold prices consolidate in the middle of the flat range that has defined its price action since reaching its record high in April."

"In terms of data, the US NFIB small business optimism release delivered a better than expected recovery, printing its first m/m gain following a steady run of deterioration since December. The US calendar is empty ahead of Wednesday's CPI release, leaving the focus squarely centered on headline risk as the Fed is in its quiet period ahead of next Wednesday's policy meeting."