What began as a modest dollar spike during Federal Reserve chair Jerome Powell's testimony before a US House committee has mushroomed into a significant risk-off climate with equities under pressure and the dollar and yen competing for safe-haven bids.

"Wednesday saw the S&P 500 break through the key 2,750 support area and close down 1.1%," reports Saxo Bank head of forex strategy John Hardy, with Saxo equities head Peter Garnry calling the dismal stocks session a "Powell hangover".

While the dip in US shares may have been prompted by a strengthening greenback, Garnry cautions investors watching the Brexit-linked sterling collapse not to expect a similar, inverse reaction in the FTSE 100.

"A weak pound moving equities higher is not a given," says Garnry, with Hardy chiming in that the most recent Brexit complexities represent a new and dismal reality for British negotiators.

With the dollar moving higher, Hardy notes that AUDUSD and USDCAD have seen bullish USD moves through their 200-day moving averages and points to EURUSD as the pair to watch this weekend given the twin event risks of the Italian election and the German SPD vote, which will determine the party's participation in a "grand coalition" with Chancellor Merkel.

"A major USD rip could push this pair through the 1.21 level," says Hardy.

Ultimately, Hardy says that the USD likely has until the end of Monday's New York session to either reassert itself with a pronounced bid or watch sellers reappear.

Today sees the release of manufacturing PMIs across Europe as well as US PCE inflation at 13:30 GMT and February ISM manufacturing data at 15:00. Macro readings have been rolling over of late with the G10 surprise index down to 9.9 from 34.4 in January, lending weight to the day's releases.

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