After last night’s vote in the House of Representatives to pass a deal to suspend the US debt ceiling through 2025, the United States Dollar starts this morning losing against most majors.
Overview
Risk appetite across the world has improved substantially overnight as the risk of default from the US is all but gone. The second chamber of Congress and President Joe Biden are no hurdles to this deal, and equities are up across the world. The importance of this deal’s passage to the global economy is hard to overstate – as the world’s largest economy, a default from the United States would reverberate internationally and wreak havoc on markets writ large.Further driving dollar and haven weakness, several speakers from the Federal Reserve yesterday voiced their support for a pause to the Fed’s hiking cycle in June. Though caveats remain for the remaining data releases before the June 13-14th meeting, multiple governors said that the Fed could stand to hold interest rates steady and assess the full impact of this hiking cycle. China’s mixed economic recovery after exiting “zero-COVID” policies is also keeping any hawkish tones, specifically from the Fed, largely at bay today. Though this competes a bit with risk-on attitudes, the US’s debt ceiling passage is dominating markets today.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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CHF ⇓
The Swiss Franc is one of only a few currencies to take a loss against the USD this morning as traditional safe haven currencies lose on global risk appetite. President Thomas Jordan of the Swiss National Bank also spoke overnight, striking a mildly dovish tone. The SNB’s inflation target is more generous than that of most central banks across the world; while Swiss inflation has been above 2% all year, the SNB’s hiking cycle of 225 basis points is far below the 375 basis points of the European Central Bank.
AUD ⇑
Australian Dollar and New Zealand Dollar are rising in tandem this morning against USD as most commodities rise. After Chinese data missed expectations yesterday, today’s Caixin PMI index posted a slight gain and drove strength in the Antipodean currencies. An improvement in global risk sentiment is undoubtedly a good thing for these two currencies, playing the opposite side of the market as traditional havens.
