The risk-off trade lends support to the US Dollar.
The index advances past the key 100.00 mark.
Housing data will be in the limelight later in the NA session.
The greenback, when tracked by the USD Index (DXY), accelerates the recovery beyond the key 100.00 hurdle on Wednesday.
USD Index looks bid on risk-off trade
The index adds to Tuesday’s small uptick and looks to consolidate the breakout of the key 100.00 barrier on the back of the resurgence of the risk aversion and the corrective move in the risk complex.
In the meantime, investors continue to see the Federal Reserve hiking rates by 25 bps next week, although their attention seems to have now shifted to any potential moves on rates beyond the July gathering, particularly amidst lower inflation and some easing in the labour market.
In the US data space, MBA Mortgage Applications are due seconded by Housing Starts and Building Permits for the month of June.
What to look for around USD
Price action around the index now looks constructive above the 100.00 hurdle and bolstered by the risk-off mood.
In the near term, there are no changes to the perception that the Fed would resume its tightening process later in the month despite persistent disinflationary pressures and the still tight labour market.
This view was further bolstered by comments from Fed Chief Powell at the June FOMC event, who referred to the July meeting as "live" and indicated that most of the Committee is prepared to resume the tightening campaign as early as next month.
Key events in the US this week: MBA Mortgage Applications, Building Permits, Housing Starts (Wednesday) – Initial Jobless Claims, Philly Fed Manufacturing Index, CB Leading Index, Existing Home Sales (Thursday).
Eminent issues on the back boiler: Persistent debate over a soft/hard landing of the US economy. Terminal Interest rate near the peak vs. speculation of rate cuts in late 2023/early 2024. Geopolitical effervescence vs. Russia and China. US-China trade conflict
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