The firmness witnessed in the greenback during yesterday’s holiday-thinned trading session has carried over as liquidity and volume return to financial markets, causing the DXY to jump higher throughout Asian and European trade. The chief drivers that have spurred the dollar recovery have not changed materially, but the narrative is taking a greater hold of market participants as they weigh testimony prior to the holiday weekend from FOMC members Yellen and Fischer, who both struck a cautious tone, albeit with a slight bias for starting the gradual process of raising rates later this year.
In addition, the success of the anti-austerity party in Spain over the weekend has investors in Europe on shaky ground, as the negotiations between Greece and their official creditors now become all that more important, as they will likely act as reference material if a similar situation arises in Spain. In addition, there has been no further progress in negotiations between Greece and its creditors, leaving next week’s payment to the IMF in jeopardy. Though this is not the first time Syriza has raised alarm bells that they will not be able to make a debt repayment if a new deal is not reached, but the fact that the last payment to the IMF was made possible by tapping an emergency fund at the IMF itself, is leading market participants to believe the potential conclusion to the Greek saga is near. As a result, the euro is emitting a solid offer tone midway through the European session, though the release of Durable Goods before the North American open will likely drive price action throughout the rest of the morning.
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