US dollar index sits at 3-week tops in Asia, What’s next?

The US dollar, when gauged by a basket of six major currencies, extended its bullish momentum into a fifth-day today, advancing further to the highest levels since March 15 in Asia Monday.

The USD bulls added minor-gains onto post-NFP extensive rally and clocked fresh three-week tops at 101.22, as investors now shift their focus towards the key US macro releases lined up in the week ahead, which will help build a case for a June Fed rate hike.

Despite worse-than expected headlines numbers from the US labor market report, the US dollar rallied hard on Friday, as markets cheered details within the US employment data and hawkish comments from FOMC member Dudley.        

The BBH Global Currency Strategy Team noted, “The US created 98k jobs in March, well below market expectations for around 175k jobs. However, there were a couple of bright spots.  First, the unemployment rate unexpectedly fell to 4.5% from 4.7%.  This is a new cyclical low.  Most importantly, the decline in the unemployment rate was recorded even though the participation rate was unchanged at 63%.” 

Meanwhile, New York Fed President William Dudley said that balance sheet size reduction would not cause Fed to stall its rate hikes, adding that bond shedding could start later this year or next.

The US treasury yields across the curve also remain firmer, while the first Trump-Xi meeting hailed an ‘outstanding relationship between the US and China, also collaborates to the ongoing optimism surrounding the buck.

Moving on, we have plenty of risk events on the cards later this week from the US docket, including the PPI, prelim consumer sentiment, CPI and retail sales data. Meanwhile, markets now eagerly await Fed Chair Yellen’s speech due later today in the American afternoon, following the release of LMCI data. Yellen is due to speak at the University of Michigan.