The U.S. Dollar is a touch stronger this morning after falling overall during the last two sessions.
Overview
The Bloomberg Dollar Index is up 0.3% at the time of writing, after falling over half a percent earlier in the week. The modest pop in the dollar comes as risk sentiment is negative this morning. Major US indexes gained for three straight days to start the week as concern over the new Omicron variant waned. However, futures are in the red today as the market weighs the effects of policy decisions on the economic outlook.
It is also likely that equity and currency traders are squaring positions ahead of tomorrow’s consumer price index print. Consumer inflation is likely to come in at the highest level in decades, putting extra pressure on the Fed to speed up the taper process at their meeting next week.
This morning’s economic data shed a more positive light on the labor market, which would give the Fed some cover if it indeed became more hawkish. Weekly jobless claims fell to 184K last week, better than the 220K expected.
What to Watch Today…
- No major economic events scheduled for today
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EUR
The Euro is retreating this morning after gaining 0.7% versus the U.S. dollar yesterday. The dip comes as traders are moving into safe-haven assets such as the greenback and Japanese yen this morning. The common currency is also seeing some pressure following a study released by the European Central Bank that showed the central bank is looking into whether to tweak how it reinvests emergency bond purchases “to help countries weather future moments of market turmoil.” They added that no decision has been taken, but the market reaction to the study was “dovish.”
GBP
The British pound remains under heavy pressure. Sterling reached a year-to-date low during yesterday’s session and has not been able to recover. The British government instated “Plan B” to combat covid which included work-from-home guidance. Bloomberg Economics estimates the move could cost the British economy 2.6 billion dollars a month. Goldman Sachs also pushed back its forecast for a U.K. rate hike, adding pressure on the sterling.
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