After a bit of retracement in the overnight session, the United States Dollar once again finds itself on the front foot this morning.
Overview
Yesterday’s panel in Sintra featuring Jerome Powell, Christine Lagarde, Andrew Bailey, and Kazuo Ueda proved to be quite the show, prompting dollar positivity across the board. As the three other central bankers featured appear to be facing a more difficult situation than Powell and the Fed, the US’s relative strength shone through. Powell all but promised two more rate hikes this year from the Federal Reserve and reaffirmed the current market belief that there will not, in fact, be any cuts this year while the fight against inflation rages on.
While markets took Powell’s words in stride, the three other central bank heads did not fare nearly as well. Andrew Bailey and Christine Lagarde, in particular, faced tough lines of questioning on their ability to tackle continuing inflation crises in their regions as several nations in the Eurozone and the UK teeter dangerously close to a recession with little abatement in inflation rates. Powell’s steady hand through this record-long hiking cycle has proved once again to put the US in a better position to achieve a soft landing than most other major economies, driving demand for USD through yesterday and into this morning.
US GDP data for Q1 was also released at 8:30 this morning, posting an upside surprise with growth at 2% quarter-over-quarter versus 1.4% expected. Personal consumption also rose more than expectations, while at the same time, the Fed’s preferred inflation gauge of PCE actually declined slightly – very good news for the Fed. All data releases from this week have been strong indicators for the US economy, and markets are now questioning whether the recession forecasted for the second half of this year will materialize at all.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
Holiday Donation Results – Thanks for Helping!
Earlier this year, Monex made a donation in honor of your continued trust in us for your FX needs. We’re happy to report that each charity received a percentage of an overall amount based on your votes. Thank you for participating! View Results
Monex USA introduces OPTIONS
With currency exchange rates in a constant state of flux, companies transacting cross-border face the risk of losing substantial sums of money if they fail to hedge their exposure to these shifts. Monex USA now offers a wide range of FX options that could help your business better manage risk. Learn More
EUR ⇓
The single currency, after clawing back some of yesterday’s losses overnight, started this morning heavily on the back foot against USD. German inflation data this morning further complicated the already-cloudy path forward the ECB must undertake to tackle entrenched inflation in the region, coming in above expectations. When taken in conjunction with last week’s PMI data showing contractions in both France and Germany, the European Central Bank’s proposed hikes could well push the region into a recession.
JPY ⇓
Japanese Yen starts this morning on a slow and steady decline against USD today. The Bank of Japan’s so-called “verbal intervention” over concern about continuing weakness in the currency may not have had the intended effect, driving prices down north of 2% over the last three days. Chief currency Masato Kanda’s threat of a response if there are any excessive moves in the currency market may well be put to the test as JPY touches its worst rate against USD since November of last year.
