The US dollar hasn't topped out for the day just yet. After a few hours of consolidation, it's now trading at the highs of the day right across the board.
The latest domino to fall is the GBP/USD annual low of 1.1837 set in early January. Thee pair is now down nearly 200 pips to 1.1830.
One catalyst is the bond market as US 2-year yields rise 10 bps to a session high at 4.99%. A 5% return for two years is attractive to large classes of investors everywhere and are a good reason to own US dollars. It would be the first time above 5% June 2007.
EUR/USD is now down 125 pips to 1.0554 but still has some support down to the February low of 1.0533. Even closer to breaking out is USD/JPY, which is up 105 pips to 136.97 and just shy of last week's high of 137.10.
Elsewhere, the trio of CAD, AUD and NZD have all broken recent ranges, led by a 2% drop in AUD/USD to the worst since November 20. The RBA decision today signaled a central bank that's less-inclined to hike rates and that could also be the message from the Bank of Canada tomorrow.
Below is how the RBA statement changed today, with underlined words added.
The Board expects that further tightening of monetary policy will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary. In assessing when and
how much further interest rates need to increase, the Board will be
paying close attention to developments in the global economy, trends in
household spending and the outlook for inflation and the labour market.
The Board remains resolute in its determination to return inflation to
target and will do what is necessary to achieve that."
It's a subtle change but the market now sees a 75% chance of no move at the April 4 meeting.
