The U.S. Dollar continued to improve this morning as equity markets seem likely to keep giving up gains from their January rally.
Overview
After Friday’s release of non-Farm payrolls that produced a figure far higher than expected, speculation has grown that the Federal Reserve will have enough evidence of an economy that requires ongoing contractionary monetary policy. After all, heads of both the Fed and European Central Bank have warned that a restrictive environment may not go away any time soon.As we have discussed in previous writings, the Fed wants to hurt employment to then affect demand, thus bringing down inflationary pressures. Price growth can add obstacles to an economy with already mixed feelings and uncertainty. Tomorrow, the Fed’s Chairman Jerome Powell will be interviewed right as new higher odds for hikes into June are being placed.
What to Watch Today…
- No major economic events are scheduled for today
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JPY ⇓
The Yen continued its drop from Friday and fell nearly a percent through the Asian trading session overnight on reports that Masayoshi Amamiya has been approached to succeed the current governor Kuroda as the head of the central bank. Amamiya is widely expected to continue the ultra-dovish monetary policies enacted by Kuroda even as inflation continues well above target levels.
MXN ⇓
The Mexican peso dropped more than 1% on Friday and through the weekend on the back of a massive upside surprise on jobs data from the United States. Mexico’s central bank indicated they will likely reach the end of their tightening cycle before the Federal Reserve, prompting a swift movement against the currency and the weakest MXN rates in just under a month.
