The top news this European morning is a package of monetary easing measures delivered by Chinese authorities overnight.~
What does this all mean for the dollar? Chinese measures add to the reflationary sentiment. This environment is characterised by steeper yield curves, higher equities. For the dollar itself, a reflationary environment is mildly negative as investors rotate into more pro-cyclical and EM currencies. However, in today's environment, investors need to be very selective as to which currencies they choose to hold against the dollar. For example, European FX looks very mixed at the moment and the euro will be struggling with fiscal consolidation over coming years – and potentially sending it on a collision course with the US over trade policy given Europe's export growth model.
For today the only US data of note is September Conference Board consumer confidence. With equities doing well, this is expected to tick a little higher and keep the soft landing in play. Given more manufacturing data expected out of Germany today and the euro's large weight in the DXY, this probably means DXY continues to trade a tight 100.50-101.00 range.
After another drop in the eurozone manufacturing PMI yesterday and the composite index dropping into contractionary territory, investors will be bracing for a soft German Ifo number today. Indeed, yesterday's swathe of PMI data took its toll on the rates markets (two-year EUR swap rates off 7bp) and the euro. Were it not for the global inflationary environment EUR/USD would look more vulnerable under 1.1100. For the time being, however, we slightly favour this 1.1100-1.1150 range to hold, with the best news for EUR/USD potentially coming with US price data on Friday.