Exiting the holiday weekend, the United States Dollar starts the morning a bit on the back foot against most major currencies.
Overview
Volatility was fairly limited over the weekend until all major markets reopened last night when real money flows took over and spiked USD against a few currencies, though the Buck has since lost all that ground and a bit more. We start the week down against all G10 currencies.Focus domestically remains on the ongoing debt ceiling debate. House Speaker Kevin McCarthy and President Joe Biden reached a tentative agreement over the weekend, likely to come to a vote in the House of Representatives tomorrow. Both political parties can present this deal as a win, which is boosting risk sentiment across the globe, and equity markets are rising in tandem. The proposed deal, which would suspend the debt ceiling until January 1, 2025, still faces the political hurdle of actually passing a vote in the House. Hard-liners in the GOP may still put up a fight for further spending cuts. If the House passes, the Senate and President Biden are unlikely to be hurdles, prompting markets to breathe a sigh of relief.Additionally, inside the US, strong fundamental economic data released over the last week has continued to boost the odds of a further interest rate hike from the Federal Reserve later this month. Q1 growth metrics and persistent strength in consumer spending are currently placing the odds of a hike around 60%, up dramatically from the beginning of last week. Optimism is the overarching theme of the morning, but warning signs remain within the US economy that could prove disastrous later in the year.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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JPY ⇑
Japanese Yen also posted a substantial gain of about half a percent against the Buck this morning. Though traditionally, this haven currency would not see gains with a risk-forward appetite dominating markets, the heavy losses it sustained last week make this morning’s gain more of a correction than a real indicator of sentiment. In comments over the weekend, Japan’s top currency official Masato Kanda warned that the government would take action if the Yen continued to weaken past last Friday’s lows, as seen in September and October.
GBP ⇑
Pound Sterling is the big winner of this morning’s trading session as the UK comes off its own banking holiday yesterday, gaining six-tenths of a percent at the time of writing. The UK’s shop price index released overnight showed a 9% year-over-increase in prices, still far too high for the comfort of the Bank of England. Though food price inflation has begun to ease slightly, other measures still remain heavily entrenched and may force the hand of the central bank at its June meeting.
