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Somewhat lost amid the Wall Street rally on Monday was the U.S. dollar (USDOLLAR) (NYSEARCA:UUP) rolling over.

The S&P (SP500) (NYSEARCA:SPY), Nasdaq (COMP.IND) and Nasdaq 100 (NDX) (QQQ) and Dow (DJI) (DIA) surged and futures are pointing to a higher open Tuesday. Helping buy sentiment is a substantial drop in the greenback, with the Dollar Index closing down 0.9% as global factors gave traders a reason to cash on on continued strength.

The dollar index is up 17% in 2022, a huge amount by currency standards, and has only seen one down month this year (in May). That strength has led to a major risk for equities, according to strategists. Morgan Stanley argued this type of dollar strength typically ends in a “financial or economic crisis or both.”

“There are few more pressing matters against financial stability than the multi-decade high from the Greenback,” John Kicklighter, chief strategist at DailyFX, wrote. “The practical implications for export inflation pressures and the trouble afforded emerging markets looking to finance their massive debt load cannot be overlooked.”

The U.K effect: A trigger for Monday’s dollar selloff was the very new government caving to the bond market and scrapping nearly all of its tax-cut plans that had been at the forefront of its economic policy. The spend-big-cut-taxes plans led to a surge in yields amid a liquidity crisis that threatened pension and mortgage markets.

Pound sterling (FXB) surged against the dollar as U.K. gilt yields tumbled. The Bank of England, which ended its bond-buying support of long-dated debt Friday, is now considering delaying selling bonds, or QT, until the market calms, the FT reported.

A firming of the pound gave dollar bulls one fewer currency to target (although there still is the beleaguered yen). And while a softer dollar won’t be any help for the current earnings season, it could help with Q4 revisions going into the end of the year.

The big question is if it can last. This morning the dollar is broadly up 0.2% and the pound is off 0.6% vs. the greenback, having lost early gains from the QT report.

Dollar bears will struggle for traction: Equity dip-buyers were out in force and are “are keeping the dollar somewhat on the back foot, which is fair enough after the fall we’ve see in equities and the rise we’ve seen by the dollar,” SocGen macro strategist Kit Juckes said.

“This is probably a temporary hiatus, however,” he added. “Tighter money, no Chinese boost and geopolitical dangers aren’t ‘new news’ but they hang around in the background limiting dollar corrections.”

“While the USD retreat is praised for its relief, it isn’t exactly a reliable trend to draw from yet,” Kicklighter said. “What was the motivation to the currency’s trip? Rate expectations haven’t faltered thus far, but there is perhaps a watered down safe haven perspective with the bounce in the S&P 500.”

With “Fed speakers likely to be queuing up to get onto the wires before the pre meeting ‘blackout’ comes into effect at Friday’s close, and as markets brace for a busy fortnight beyond this week, including policy decisions from the ECB, FOMC, and BoE, it’s tough to see the gains being durable,” Michael Brown, head of market intelligence at Caxton said.

“Those are longer-run considerations to keep on the radar. In the ‘here and now’, markets have another relatively quiet schedule of events today … and another day of being engrossed in the ‘Westminster bubble’ awaiting us.”

Dig deeper into the big U.K. U-turn.

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