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Covid flare-up in India dampens demand for risk assets

The kiwi and the loonie have been trading in the green during European trading hours. Since the open, the euro has extended Tuesday’s losses. The single currency slid to 1.1999. The US dollar has drawn support from a moderate rise in UST yields as well as a spike in Covid cases across India.

Sterling fell to 1.3910 but the decline stalled following the release of UK CPI data, which showed that the consumer price index rose by 0.3% MoM in March and 0.7% YoY, nearly in line with the median consensus that called for 0.3% MoM and 0.8% YoY.

The decline in the EURUSD and GBPUSD pairs is merely temporary. The 10-year UST yield narrowed to 1.56%. Market participants are watching to see if the rate reaches 1.55%. If this level does not hold, the dollar will continue to weaken and major currencies will retrace to Monday highs.

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