After experiencing heightened volatility following the Federal Reserve decision Wednesday afternoon, currency markets were quiet overnight.
Overview
The Bloomberg Dollar Index is up 0.2%.
The dollar rallied significantly during the second half of last week on what traders deemed a hawkish result from the FOMC. However, the greenback gave back approximately half of those gains yesterday on a so-called “relief rally.” The dollar looks to regain its positive momentum today.
The Federal Reserve will dominate today’s headlines as well. While there are a few regional Fed Presidents are scheduled to speak this morning, the headline will be Fed Chairman Jerome Powell’s testimony before the House. Powell’s prepared remarks that were already released show that Powell will double down on his assertion that the uptick in inflation is transitory. This is not surprising. Fireworks may occur when Powell must answer tough questions from lawmakers about inflation and the health of the economy. Powell’s testimony before the House Select Subcommittee will begin at 2 p.m.
Existing Home sales and Richmond Fed Manufacturing data are due out at 10 a.m. but will likely be shrugged off by my market participants as it seems everyone is looking ahead to 2 p.m.
What to Watch Today…
- FOMC Chief Powell testimony at 2 p.m.
CAD ⇓
The Canadian dollar is under pressure this morning, selling off modestly as the price of oil came off its overnight highs. There was no economic data released in Canada today so the move looks to be mostly greenback strength positioning before Powell’s testimony.
Broadly speaking, the Canadian dollar is at its weakest level versus the U.S. dollar since April. Nevertheless, the loonie remains one of the best-performing currencies of 2021 and is up 3% on the greenback year-to-date.
GBP ⇓
Despite a strong rebound yesterday, the British pound is back under pressure against all of its major counterparts. The sterling was the biggest loser overnight, erasing much of its rebound from yesterday’s session. GBP/USD is lower for the fifth time in six days. There is little in the way of data, so we are left with blaming the delayed reopening due to the Delta variant for any sterling weakness.
Preliminary PMIs are due out tomorrow followed by the Bank of England meeting on Thursday.
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