The United States Dollar is trading a touch weaker this morning than at yesterday’s close, following a jam-packed geopolitical Wednesday
Overview
After the release of CPI yesterday morning showed that US inflation is resurging, with the highest print since June, President Trump surprised markets with an announcement that he had a call with Russian premier Vladimir Putin and would be seeking, with his cooperation, an end to the ongoing war in Ukraine. In response, the Dollar lost nearly all of its steam from January’s inflation reading. The Bloomberg Dollar Spot Index, at one point, fell more than half a percent in the afternoon session, but has since pared this drop to trade only slightly weaker against most major currencies. Investors had a resurgent risk appetite in response to this development yesterday, though traditional haven currencies like CHF and JPY are continuing to gain as a hedge.
Trump also announced this morning that further detail on reciprocal tariffs would come today, keeping flows relatively muted until such news becomes public, as well as continuing to boost haven currencies with the exception of the Buck. Though Trump’s post on social media platform Truth Social gave very little detail, White House Press Secretary Karoline Leavitt did previously say that this announcement would come before Trump’s meeting with Indian Prime Minister Modi this afternoon. Even without specifics so far, reciprocal tariffs would be a marked escalation in an already-fraught trade war with many economic partners. Depending on the scope of these actions, as well as how much room for negotiation there may be, the Dollar could see some resurgent strength this afternoon – but nothing is certain except for volatile trading.
The US also released January’s Producer Price Index this morning, showing that in conjunction with a hot CPI producers’ prices also grew more than expected last month. Though Powell’s testimony to Congress over the last two days was fairly uneventful, the Fed chair did note that it’s becoming clear the fight against inflation is not yet over. Bets on easing from the Federal Reserve this year have been tamped down in a big way over the last two sessions as release after release shows prices rising more than expected. The domestic economic calendar is not yet clear for the week, with retail sales for January due out tomorrow morning.
What to Watch This Week…
- Eurozone GDP, Friday
- US Retail Sales, Friday 8:30AM
- Monex USA Online is always open
Complete Economic Calendar can be found here.
GBP ⇑
Pound Sterling has gained two tenths of a percent against USD this morning after GDP for Q4 showed that UK managed to avoid a recession at the end of last year. Though the release was far from a blowout, it did show that the economy grew slightly instead of economists’ expectations for a slight contraction. The UK economy grew 1.4% on an annualized basis, far better than the same reading last quarter and giving Sterling a much-needed boost. Downside concerns for the UK economy do remain, and the Bank of England is still expected to ease more than the Fed this year.
CHF ⇑
Swiss Franc is the biggest winner in the G10 against the Dollar this morning, keeping its traditional appeal as a safe haven asset as geopolitical uncertainty swirls through Europe. Though equities are ebullient at the news that Trump and Putin are searching for a resolution to the ongoing Russo-Ukrainian war, CHF has gained more than half a percent over USD as a good protectionary asset should potential peace talks fall through. Energy prices, though, have fallen dramatically in response to Trump’s announcement yesterday. Swiss core inflation also rose a touch more than expectations in January, providing further room for CHF to run stronger.
