The U.S. Dollar improved overnight with the exception of losing ground to petro-currencies after a recovery in the price of oil despite a not so rosy outlook.
Overview
Demand in China, the biggest oil importer, reportedly could start diminishing. Regardless, the global recovery narrative seems to be back as equities managed some of their best gains since June.
We shall see if markets maintain momentum as some bankers worldwide are starting to be concerned about the formation of rising risk bubbles. Meanwhile, the buck has advanced for a fourth straight session overall as it seems to be buoyed by improvements to vaccine rollouts and hopes that stimulus will eventually make its way to an economy already making some progress.
Thursday’s OPEC+ meeting certainly carries a lot of weight, but we will get a more domestic glimpse of how businesses are doing once we get the Fed’s Beige Book tomorrow. Any progress from Congress on spending could surely put the dollar on a path for further appreciation.
What to Watch Today…
- No major events scheduled for today
EUR ⇓
The Euro is trending downward following statements from finance officials who see it as imperative that the European Central Bank not allow bond yields to rise that could affect the accommodative environment. EU finance member Philip Lane explained that the bank should remain focused on expanding sovereign bond purchases to maintain favorable arrangements for business activity. He was reinforced by Francois Villeroy de Galhau, a policymaker who said that the ECB “can and must” act to prevent undesirable rises in yields that adds costs of borrowing. In turn, Euro is back to being a low-yield carry-trade currency.
GBP ⇓
Pound Sterling has been a strong performer this year but could face its biggest challenge thus far as economists and investors look for the U.K. budget. While there is the promise of no tax increases and other items to aid business, there is concern about the slow recovery and lack of big works as the U.K. entered a period of major trade transition in the midst of a global pandemic. Tax revenues across the U.K. have been damaged by lockdowns, so we shall see what this spending bill has in store.
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