The U.S. dollar modestly fell again overnight, trading lower for the third consecutive day.
Overview
Global equities ticked higher and diminished demand for the dollar. European equities are up today, pairing a weekly decline. Asian equities are headed for a sixth weekly gain, led higher by China relaxing its Covid Zero policy. Nevertheless, the overnight moves were muted as all eyes are on this morning’s producer inflation data. The dollar is in rally mode early this morning after a report showed higher-than-expected inflation. Producer prices rose 7.4% year over year, higher than the estimated 7.2%. PPI rose 0.3% month over month, also higher than the estimated 0.2%. The print adds to inflation jitters and has sent U.S. equity futures lower. The greenback has gained a few tenths of a percent against most of its G10 counterparts in the minutes after the release.The chances of a surprise 75-basis point hike by the Fed next week have not changed much in the immediate aftermath. We still expect the Fed to hike rates by 50 basis points on Wednesday. However, consumer price data is due out on Tuesday and can change the equation.
What to Watch Today…
- No major economic events are scheduled for today
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CAD ⇓
The Canadian dollar struggled to take advantage of the slightly weaker U.S. dollar overnight and is now getting pounded following higher inflation in the States. USD/CAD is up 0.5% from last night’s close. The Canadian dollar has seen over 1% moves nearly every day recently as traders continue to digest the surprise 50 basis point hike and balance it with guidance from the Bank of Canada that future rate hikes will be coming to an end soon. There is no major data out of Canada today.
GBP ⇑
Sterling prices climbed overnight, and GBP is currently trading near daily highs despite the US Producer Price Index’s slight upside surprise. The latest Bank of England-Ipsos survey on 5-year inflation shows higher inflation expectations are deeply embedded in the economy, though the central bank is still charting a course to raise rates 50 basis points next week.
