• DXY moves higher and remains supported by risk-off mood.
• Demand for bonds drag US yields lower across the board.
• Weekly Claims, Producer Prices next of relevance in the docket.

The US Dollar Index (DXY), which tracks the greenback vs. a bundle of its main competitors, accelerates gains and reaches new cycle peaks near 104.50 on Thursday.

US Dollar Index stronger on risk-off

The index picks up extra pace and extends the rally to levels last seen back in December 2002 around 104.40/50 against the backdrop of rising risk aversion in the global markets and the subsequent impact on the risk complex.

Furthermore, the prevailing risk-off mood supports fresh inflows into the bonds markets and put yields under extra downside pressure along the curve, at a time when investors continue to gauge the latest US inflation figures vs. the recent hawkish Fedspeak and prospects of further tightening by the Federal Reserve.

Later in the NA session, the usual Initial Claims are due seconded by Producer Prices for the month of April.

What to look for around USD

The dollar extends the march north and prints new tops near 104.50 on Thursday. This time, the move appears underpinned by the re-emergence of the risk aversion, which in turn looks reinforced by geopolitical concerns. Also supporting the buck appears investors’ expectations of a tighter rate path by the Federal Reserve and its correlation to yields, the current elevated inflation narrative and the solid health of the labour market. On the negatives for the greenback turn up the incipient speculation of a “hard landing” of the US economy as a result of the Fed’s more aggressive normalization.

Key events in the US this week: Producer Prices, Initial Claims (Thursday) – Flash Consumer Sentiment (Friday).

Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Future of Biden’s Build Back Better plan.

US Dollar Index relevant levels

Now, the index is advancing 0.17% at 104.18 and the breakout of 104.43 (2022 high May 12) would open the door to 105.00 (round level) and finally 105.63 (high December 11 2002). On the other hand, immediate contention appears at 102.35 (low May 5) seconded by 99.81 (weekly low April 21) and then 99.57 (weekly low April 14).