The U.S. dollar was softer vs. the major currencies Tuesday as sentiment remains positive and risk on trading picks up. Dollar was up only against the yen and Swiss franc, which are both weaker Tuesday and finally succumbing to an improved environment after firming on Monday.

The euro is trying to move through 1.30, helped by German GfK consumer confidence for August at 3.9 vs. 3.5 expected and revised 3.6 (was 3.5) in July. Emerging markets forex was firmer across the board as fundamentals remain very strong and more central banks are hiking rates (Israel Monday and India Tuesday). Even Hungary is recovering along with the rest of the emerging markets, with a decent three-month T-bill auction that saw good demand but at still-elevated rates. Biggest gainers on the day so far vs. the dollar were HUF, KRW, INR, PLN, and ZAR, while the only losers vs. the dollar were CHF and JPY.

Asian markets were higher on carry-over from the U.S. rally Friday, and MSCI Asia was up 0.6% Tuesday. Thailand, Pakistan, and Sri Lanka markets outperformed Tuesday, while China, Taiwan, and New Zealand underperformed and fell on the day. European markets were higher Tuesday, with Euro Stoxx 50 up 1.1%. Futures markets were pointing to a flat open for U.S. equity markets Tuesday.

The U.S. bond market was weaker as global risk sentiment improves, but should be underpinned by the weak U.S. growth outlook. Japan's bond market was higher as 10-year yields were down 1 basis point Tuesday, while European bond markets were mostly higher.
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