The recent movement in the US dollar is difficult to understand, except for the possibility of a rush for USD liquidity by the end of the month. This has resulted in stocks retracting from their peak levels, prompting concerns that this could indicate a larger issue. However, the dollar has remained largely unchanged against currencies such as the yen, pound, loonie, and Swiss franc, with the euro experiencing slight gains and the Aussie and kiwi performing well.
In terms of economic data, the UMich sentiment showed a slight improvement, although the final version of this report typically does not significantly impact the market. The PCE report earlier was slightly underwhelming in terms of inflation, which should theoretically have a negative effect on the dollar. However, at this time of the month, quarter-end flows tend to dominate the market rather than economic fundamentals.
Overall, the unexplained movement in the dollar suggests a potential rush for USD liquidity as the month comes to a close. Stock levels have also decreased, raising concerns about underlying issues. Economic data such as the UMich sentiment and the PCE report have had limited impact, as flows tend to dictate market behavior during this time of the month.