USD steady but retains a weak undertone - Scotiabank

The US Dollar (USD) is steady to slightly lower at the start of what may be a relatively quiet and somewhat disjointed week, given holidays in North America, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD steady but weak undertone persists on trade

"The USD retains a weak undertone overall but is mixed on the day so far; the JPY is stronger, the EUR is flat and the GBP is slightly weaker among the major currencies, reflecting a lack of direction in the dollar generally. Investors may be waiting to see what develops on the trade and fiscal front in the coming days. Indications are that some trade agreements may be in place by the July 9th deadline but these agreements appear to lack (a lot of) detail and are far short of the radical makeover of trade relations that President Trump has sought."

"Senate Republicans are trying to find agreements on various aspects of the president's tax bill in order to make progress that he wants before the weekend. Still, volatile trade and loose fiscal policy plus the president's continued attacks on the Fed's leadership are undermining the appeal of the USD and US assets more broadly for international investors who find themselves perhaps overexposed to US highly valued assets and underhedged on the weakening USD. US data reports today are limited to the Dallas Fed Manufacturing Activity index."

'The Fed's Bostic and Goolsbee are speaking. ECB President Lagarde kicks off the ECB's annual Sintra symposium at 15ET. Germany reports preliminary June CPI data at 8ET, the Q2 BoJ tankan report is out at 19.50ET. China's June Caixin Manufacturing PMI is released at 21.45ET. The DXY has managed to stabilize around the 97 point over the past few days but the general trend remains soft from a technical point of view and weak sentiment leaves the index prone to more pressure in the event of negative headline developments (such as a weak NFP report Thursday, for example). We continue to think the DXY will fall back to the 90-95 range in the coming months.'