Asian equities were mostly positive on Monday, with risk-on tone persists across the markets

The US dollar continues to show lackluster performance ahead of US CPI due this week. The USD index stays below the 109.00 handle on Monday while also resisting another sell-off following last week’s major rejection from fresh twenty-year tops seen just below the 111.00 figure. The index has settled around 108.75 in early deals, shedding 0.25% on the day so far.

Following the ascent in Wall Street stocks ahead of the weekend, Asian equities were mostly positive on Monday, with risk-on tone persists across the markets. Demand for high-yielding assets coupled with a more cautious tone ahead of US inflation data cap dollar’s recovery attempts after a solid local correction.

Price pressures are highly expected to cool down further in August as gasoline prices in the US have fallen significantly. The headline US CPI is expected to come in at 8.1% against the prior release of 8.5%.

Also, hawkish bets on ECB help erode demand for the US currency after the European regulator delivered a 0.75% rate hike and hinted at further tightening last week. Should the ECB start talking about shrinking its balance sheet, the shared currency could receive a solid boost, thus adding to the pressure surrounding the buck.

In a wider picture, however, the US dollar is likely to stay bullish and elevated, as the Federal Reserve continues to outperform its colleagues while the USD’s safe-haven status should help drive the price higher in the medium term as global recession risks along with geopolitics will continue to cap gains in stocks.   

At this stage, the USD index needs to get back above the 109.00 mark in order to regain the upside bias. On the downside, the nearest key support arrives at 108.30, followed by the 108.00 figure.


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