The U.S. dollar was on the backfoot yesterday as investors pared back expectations that the Federal Reserve will aggressively raise rates next month.
Overview
Numerous Fed officials spoke yesterday, and all made fairly dovish comments which allowed equities to rally significantly and caused the dollar to stumble. The greenback has continued its downward momentum overnight with the dollar posting losses against the majority of its rivals as market participants continue to digest Fed comments that they would not support policy tightening that would be disruptive to the economy. There are no Fed speakers on today’s docket. At 9:45 a.m., Markit’s Manufacturing Index will cross the wire followed by ISM Manufacturing and Construction spending. While possibly counterintuitive, weak manufacturing data this morning could add to the narrative that the Fed will not increase rates by 50 basis points in March and could further hurt the greenback and help equities. JOLTS job openings will be out at 10 a.m.
What to Watch Today…
- ISM Manufacutirng at 10 a.m.
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AUD
The Australian dollar has been able to take advantage of a weakening dollar even after the Reserve Bank of Australia held a dovish tone at the conclusion of its monetary policy meeting. RBA Governor Philip Lowe pledged to remain patient when assessing inflation. The central bank ended its 15-month emergency quantitative easing program but went out of its way to say that the move doesn’t imply a “near-term increase interest rates.” The Aussie immediately fell nearly half a percent in the minutes following the announcement, but the Aussie quickly recovered and is now up 0.4% against its American rival.
GBP
The British pound marched higher against the U.S. dollar as currency traders seemingly shrug off political turmoil in the U.K. Prime Minister Boris Johnson is under increased scrutiny due to reported partying and excessive drinking at 10 Downing Street during the lockdown. Some in his own party have called for the PM to step down. Regardless, the Sterling is up 0.40% overnight and has gained nearly a percent over the last two sessions.
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