The U.S. dollar is relatively flat to start the week as global markets are calmer this morning after a steep sell-off on Friday and bitcoin dropped as much as 20% on Saturday.
Overview
Early reports suggest that the new Omicron variant of Covid-19 is not as severe as the Delta variant, which is still the main strain in the United States. White House medical adviser Anthony Fauci said that was encouraged by early reports from South Africa. S&P and Dow futures are in the green while the tech-heavy Nasdaq is pairing early losses. There is no economic data on today’s docket. There are also no Fed speakers on this week’s agenda ahead of next week’s FOMC meeting. The most important reading this week will be the Consumer Price Index on Friday morning. Economists expect annualized prices to have increased by 6.7%, which would be the highest increase in decades. Unless the print misses drastically to the downside, inflation pressures will continue to press the Federal Reserve to raise rates sometime in mid-2022.
What to Watch Today…
- No major economic events scheduled for today
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AUD
Commodity-based currencies were the biggest gainers overnight with the Australian dollar and Norwegian krone leading the way. The price of oil spiked after Saudi Arabia boosted the price of its crude, signaling confidence in the demand outlook. The Aussie and Kiwi dollars also benefited after the People’s Bank of China cut the reserve requirement ratio by 0.5%, releasing more liquidity. Asian shares are still deeply in the red buy action by the central bank improves the outlook of Australia and New Zealand’s main Asian trading partner. The oil-linked Canadian dollar also improved overnight. The Bank of Canada meets on Wednesday, and we will be looking for signs of possible policy tightening.
GBP
After trading flat most of the night, the sterling is enjoying a modest pop in early trading. Bank of England Deputy Governor Ben Broadbent bucked the trend and previous guidance set last month and declined to say that interest rates will need to rise in the coming months to control inflation. Broadbent also referred to inflation as “transitory”, a term the Federal Reserve put to rest last week. Despite seemingly dovish comments from Broadbent, the sterling is 0.2% stronger versus its American counterpart.
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