Dollar Bears Gather Strength

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Global markets have lost growth momentum near recent highs. This indecisiveness can be attributed to the realisation that major central banks are slowly but surely moving towards presenting their monetary policy tightening plans.

At the moment, this sentiment is benefiting the dollar, whose weakening has paused near this years lows. Moreover, the DXY has managed to bounce back above 90, a crucial round level that might be an attempt to form a double bottom and become the basis for a pullback.

EURUSD on this backdrop came back under 1.2200, and GBPUSD rolled back below 1.4100, temporarily dropping to twoweek lows. This seems like a tug of war at an important milestone or an attempt to gather strength before a final move.

While the Dollar got some support yesterday and the markets ascent came to a halt, it is worth separating that the behaviour and sentiment of the Reserve Bank of New Zealand set to raise rates in 2022 and Bank of Canada unwinding QE does not guarantee the same action from the Fed.

Further adding to the contrast is that the RBNZ and BoC represent commodityexporting countries like Russia, where the Central Bank has already started raising rates.

The ECB, the Fed and the Bank of England are on the other side of the barrier. They hardly benefit from the recent commodity price boom and multiyear highs in global manufacturing activity. Perhaps even the opposite. The pandemic is hitting the service sector the hardest, and this sector represents a large…

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