Fundamental Analysis

Dollar Boosted by Hawkish Comments from NY Fed President William Dudley; Brexit Talks Commence

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The US dollar was one of the best performing major currencies after receiving a boost from some hawkish comments from New York Federal Reserve President William Dudley. Brexit negotiations are underway in Brussels, which has potential to create a risk event for the pound and the euro.

A quiet economic calendar today resulted in relatively little movement in the forex markets. However, investors will remain focused on the Fed speakers this week in the aftermath of last week's FOMC meeting.

Dudley kicked off what is a busy week for Fed speakers. He was speaking at a business round-table meeting in Plattsburg, NY today, making hawkish comments that suggested the Fed remained on track to raise interest rates further this year despite recent disappointing US inflation data. Overall, the Fed's rhetoric so far has been favourable for the greenback, especially since the US central bank appears to be looking through soft inflation and is still holding an overall hawkish view.

Chicago Fed President Charles Evans is due to speak later today in the US, while Vice Chairman Stanley Fischer, Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan are scheduled to speak on Tuesday.

The dollar rose against the yen on Dudley's comments, rising to 111.38 yen. The euro slid to as low as $1.1170 after hitting a session high of $1.1212. The single currency was buoyed earlier in the day by news that French President Emmanuel Macron's party won the parliamentary elections on Sunday. Flash Eurozone PMI data out at the end of this week would be an important risk event for the euro.

Meanwhile, Brexit negotiations, which officially kicked off today, are also a risk for the euro and more specifically for the pound. Sterling fell to last trade at $1.2747 after hitting as high as $1.2813 earlier in the session.

In commodities, spot gold slid to a 4-week low due to a broadly firmer dollar, to touch $1247.31 an ounce, down 0.5% on the day. WTI oil managed to cross back above the key $45 a barrel, up half a percentage point so far today.

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