DXY inter-markets: resuming the up trend?

The US Dollar Index (DXY) – which tracks the buck vs. its main competitors – remains firmly on its way to close the week with gains for the first time after six consecutive pullbacks.

US yields have rebounded from weekly lows and they stay as the almost exclusive driver behind the current up move in the index, moving at the same time in tandem with developments from the US political arena.

Additionally, recent comments by President D.Trump have prompted the reflation/growth trade to return among investors, adding extra legs to USD. Trump noted that some ‘phenomenal’ tax reform could be in the offing and should be announced within the next 2-3 weeks.

Whether the current rebound is part of a broader pick up in the demand for the buck, and thus a resumption of the up ward trend, remains to be seen and hinges almost entirely on US politics. In the longer run, the case for a stronger buck sustained by Fed tightening (vs. its G10 peers) remains unchanged and allow for another test of recent 14-year tops near 104.00 the figure in the next months.