ING’s Chris Turner notes the Dollar (USD) remains supported as Middle East tensions persist and US trading partners resort to intervention, tighter policy or regulatory measures to defend their currencies. He highlights potential US labour market strength and widening EUR/USD cross-currency basis as factors that could keep DXY above 100 and sustain Dollar strength this week.

Middle East risk and US data support

"The dollar remains bid and trading partners, whose currencies are under pressure, are looking at a range of options to resist this currency depreciation."

"We are also keeping our eye on the dollar cross currency basis swap for any signs of tightening in dollar funding conditions. The short-dated EUR/USD measure has been widening a little and any sharper moves here would likely go hand-in-hand with a stronger dollar and more broad-based pressure on risk assets."

"In terms of the US data this week, the focus will be on the labour market. JOLTS job opening data, ADP and then the March payroll report are released. Friday's NFP release, with consensus at +60k for job growth and a 4.4% unemployment rate, should leave the market minded to price Federal Reserve tightening this year in response to the energy shock. Any surprise weakness could hit the dollar."

"Also today, look out for any comments from Fed Chair Jerome Powell from 4:30pm CET today as he takes part in a moderated discussion at a Harvard event."

"DXY is again trading above 100 and another test of resistance at 100.25/50 looks likely this week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)