The U.S. Dollar is seeking clarity this morning as it continues to be pulled in different directions after data that seems to solidify the expected: a Fed hike next week.
Overview
Today’s measures of March Personal Income and inflation in the form of Personal Consumer Expenditures Deflator came in higher than expected and thus giving further merit to Federal Reserve Chairman Jerome Powell who had seen this type of data in his discussions to the press. While price growth remains stubborn, it did slow down on a month-to-month basis to 0.1%, which is less than the 0.3% for February. At the same time, people are seeing their incomes stay steady, a sign that labor remains healthy in spite of the adjustments made for higher borrowing costs in the financial system.Equities had an excellent session yesterday and perhaps risk-appetite will remain strong no matter what the Fed has to exercise going forward. Their message has been consistent and the data as they figured would start showing a dented economy with some price inflation that is not meeting their number but headed there. By now, markets have to put serious doubt on any chances of cuts to interest rates for this year. Any more talk about that is only going to keep hurting the buck, which is now naturally losing ground as other economies pick up the pace post-pandemic.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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JPY ⇓
The Japanese Yen is at its weakest point since the start of March following the first Bank of Japan meeting for newly elected Governor Kazuo Ueda. To begin his reign, the central bank official called for a review of policy, scrapped language indicating that rates will stay the same, and promised to use yield controls to maintain easing. Markets seemed to believe that Ueda would signify the rapid end to long-term dovish monetary policy, but these hopes have been dashed. Ueda may indeed see it fit to increase interest rates down the line, but the globe is desperate for Yen to improve as a reserve currency and will perceive it as only more attractive once the BOJ acts slightly hawkish.
MXN ⇑
Mexican Peso improved following more evidence of continuous growth in the country’s economy. Gross Domestic Product figures for Q1 revealed a 3.87% advance while only 3.4% was estimated. LATAM as well as the rest of the emerging-market world is having a moment as it recovers from the supply-chain issues that plagued trading and commerce for 2+ years. Mexico is certainly in a good position as it is also sought to be used more for energy as OPEC+ makes production cuts that affect all markets. The tightening cycle by the central bank may be done, but as long as the economy is healthy, Peso will stay afloat and away from the weak average it had for 2 years.
