US Dollar Index prints four-day uptrend above 96.00 as Russia-Ukraine news spoil the mood
- DXY refreshes one-week high as Russia-linked fears underpin greenback’s safe-haven demand.
- UN calls emergency meeting, UK, Canada braces for fresh sanctions on Moscow after Putin orders troops inside Donetsk and Luhansk.
- US PMIs, Fedspeak and geopolitics to direct short-term moves, bulls are likely to keep reins amid market fears.
Market’s rush to risk-safety, mainly on Russia-Ukraine headlines, offers a warm welcome to the US Dollar Index (DXY) after a long weekend. That said, the greenback gauge refreshes weekly top to 96.16 while rising for the fourth consecutive day during Tuesday’s Asian session.
After declaring Donetsk and Luhansk in Eastern Ukraine as independent states and having signed a decree "on friendship and cooperation", Russian President Vladimir Putin ordered troops inside Eastern Ukrainian states, citing peacemaking efforts. The moves were considered as an early signal for Moscow’s invasion of Ukraine, which in the West has been flagging for long.
Following the move, the United Nations (UN), the UK and the US called for emergency meetings while Britain and Canada announced readiness for fresh sanctions against Russia. Additionally, Yomiuri mentioned Japan’s warning to stop the chip exports to Moscow if it invades Ukraine whereas Australia PM Scott Morrison said that they will be in lockstep with allies on sanctions on Russia.
Against this backdrop, S&P 500 Futures drop over 1.5% whereas the US 10-year Treasury yields decline six basis points (bps) to 1.87% by the press time.
On Monday, market sentiment initially improved on news that the US agreed on the Biden-Putin summit before Russian President Putin signaled no concrete plans for the summit. However, an extended weekend in the US and Canada restricted the reaction to the news.
It should be noted that the recent Fedspeak has gone softer and weighed on the Fed Fund Futures. On Monday, Federal Reserve Board Governor Michelle Bowman followed the tunes of Chicago Fed President Charles Evans and New York Federal Reserve Bank President John Williams while saying, “It is too soon to tell if the Fed should hike 25 or 50bps in March.”
That said, the risk catalysts are likely to keep the DXY on the front foot. However, the preliminary US PMIs for February will also be important to watch amid the recent softening of Fedspeak.
Read: US Markit PMIs Preview: Services sector has room for upside surprise, boosting the dollar
Technical analysis
Successful trading above a three-week-old descending trend line and 50-DMA, around 95.95-90 by the press time, keeps DXY bulls hopeful to challenge the monthly peak of 96.43.