USD remains firm but can't extend gains - Scotiabank

The US Dollar (USD) is tracking a little higher overall into the end of the week, with a minor gain for the Euro (EUR) leaving it as the only currency in the green on the day, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

DXY can't extend gains through the mid-99s

"The AUD and NZD are lagging following weaker than expected Chinese Manufacturing PMI data earlier (which also dunked local stocks). The USD is firm but not convincingly so. Despite positive developments this week on the trade and monetary policy front, plus perhaps some month-end related demand, the DXY has not really been able to push on through the mid-99 zone where we expected some resistance to gains to emerge. Markets appear to be devoid of a theme or key driver for the USD which might help a sustained move develop."

"DXY correlations with risk, volatility and yields are weak and converging on zero. How we end the week may shed some light on whether there is momentum enough under the dollar to extend gains into early November. That remains a possibility but, as we've noted recently, if the 2016/17 roadmap for the DXY remains any sort of guide, the broader stabilization/rebound in the dollar generally since the middle of the year is at risk of petering out shortly."

"Day 31 of the US government shutdown means no Personal Income/Spending/PCE data this morning but it also means that the shutdown is quite likely to extend beyond the record 35-day shutdown seen in 2018/19. No end to the stand off is in sight at this point. MNI's Chicago PMI report is out at 9.45ET and, with the Fed quiet period ending, Fed speakers may start to appear on TV."