- The US Dollar recovers ahead of the US session on Tuesday, driven by safe-haven flows related to the escalation between Russia and Ukraine.
- President Vladimir Putin earlier this Tuesday signed a nuclear weapons decree against Ukraine, just hours before Ukraine sent its first missiles into Russia.
- The US Dollar index trades in the mid-106 area backed by some safe haven flow.
The US Dollar (USD) is flying all over the place after Russian President Vladimir Putin has signed a decree that allows the use of nuclear weapons against a non-nuclear state if it is supported by nuclear powers earlier this Tuesday. The move is widely seen as a clear threat to Ukraine after the United States gave Kyiv permission to use long-range missiles to attack military targets inside Russia. Meanwhile Ukraine has already fired its first missiles into Russia, with confirmation from both local sources and the Russian Minister Defence Minister, according to Bloomberg.
As tensions escalate, US equities are turning red and safe havens such as the USD, the Swiss Frank (CHF) and the Japanese Yen (JPY) are seeing substantial inflows. The move is a knee-jerk reaction to the risk-on close that markets saw on Monday.
The US economic calendar is all about US Housing data on Tuesday, with the Building Permits and the Housing Starts data. Seeing the recent trend, expectations are that the numbers will point to a broad stabilization in the housing market.
Daily digest market movers: Housing data no surprise
- Headlines around Russia are delivering a knee-jerk reaction in markets. Russian President Vladimir Putin has signed a decree that allows the full deployment of nuclear weapons against any non-nuclear nation that strikes positions on Russian soil, Bloomberg reportsl. This basically means that once Ukraine deploys long-distance missiles from the US or the UK, Russia will be able to retaliate with the use of nuclear weapons.
- Meanwhile Ukraine has launched its first ATACMS strike inside Russia, Bloomberg reports – citing local sources. This all is taking place on the 1000th day since Russia breached Ukrainian borders.
- At 13:30 GMT, US Housing data for October has been released:
- Building Permits came in at 1,311 million units, which is lower than the previous 1.425 million.
- Housing Starts fell as well to 1.311 million against the previous 1.353 million.
- Federal Reserve Bank of Kansas City President Jeffrey Schmid delivers a speech about the US economic and monetary policy outlook at an event organized by The Greater Omaha Chamber in La Vista, Nebraska around 18:10 GMT.
- Equities are diving lower after the comments came out around President Putin signing the nuclear weapons decree. European equities are giving up all gains and slide lower by near 1.00%. US equity futures are showing smaller losses.
- The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 58.4%. A 41.6% chance is for rates to remain unchanged. While the rate-cut scenario is the most probable, traders have significantly pared back some of the rate-cut bets compared with a week ago.
- The US 10-year benchmark rate trades at 4.34%, sliding further away from the high printed on Friday at 4.50%
US Dollar Index Technical Analysis: No clear direction from here
The US Dollar Index (DXY) shakes up markets with geopolitical headlines taking control of markets. While the G20 group is meeting in Brazil, Russian President Putin signs an expanding decree for the use of nuclear weapons in Ukraine. It looks like markets are starting to doubt if this is still part of the normal “flexing the muscles” or this could turn into an actual threat.
After a brief test and a firm rejection last Thursday, the 107.00 round level remains in play. A fresh yearly high has already been reached at 107.07, which is the static level to beat. Further up, a fresh two-year high could be reached if 107.35 gets taken out.
On the downside, a fresh set of support is coming live. The first level is 105.93, the closing from November 12. A touch lower, the pivotal 105.53 (April 11 high) should avoid any downturns towards 104.00.
US Dollar Index: Daily Chart
