The Dollar Index has slipped to its lowest levels since late September, with Danske Bank highlighting lower yields as one of the key drivers behind the move. While the longer-term outlook for the dollar remains relatively solid, the market currently appears comfortable selling rallies rather than rebuilding long USD positions.

EUR: The euro continues to benefit from broad dollar weakness, although domestic data remains mixed. German factory orders disappointed this morning, limiting some of the single currency’s gains, but the bigger driver remains the weaker dollar environment.

BNY notes that stronger economic data and a vigilant ECB are helping support the euro, while UOB believes the positive bias remains intact provided EUR/USD can break and hold above the 1.1280 area. Traders will be watching closely to see whether the pair can finally escape the range that has dominated recent weeks.

GBP: Sterling continues to hold up well and remains one of the stronger major currencies.

Cable is comfortably above the 1.3400 handle and retains a constructive outlook heading into the latter part of the week.

The pound isn’t necessarily being driven by fresh UK-specific news today. Instead, it is benefitting from a combination of ongoing BoE support and broad USD weakness. As long as key support levels continue to hold, the bias remains for further upside, although traders will be wary of chasing the move too aggressively after the strong rally of recent sessions.