The U.S. dollar is on the front foot this morning as global equities dipped and more Federal Reserve members echoed Jerome Powell’s recent hawkish remarks on future interest rates.
Overview
European stocks are down half a percent this morning, breaking a five-day streak of gains. American equity futures show stocks will give back some of their gains from yesterday. Fed President Jerome Powell will speak on a Bank of International Settlements panel today. The Fed’s Mary Daly and James Bullard are also due to speak this afternoon.Russia remains atop the headlines and poses the largest geopolitical risk to markets as there appears little progress in stopping the war. President Joe Biden and NATO allies will meet in Brussels tomorrow. Most expect the West to announce new, tougher sanctions. Market participants will then weigh these sanctions and their possible effects on global growth and inflation.New home sales are due out at 10 a.m. Jobless claims and durable goods will headline tomorrow’s docket followed by pending home sales and the University of Michigan will round out the week tomorrow.
What to Watch Today…
- New Home Sales at 10 a.m.
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EUR
The Euro is back under a major psychological level versus the U.S. dollar this morning. EUR/USD has held a relatively flat range this week, fluctuating between modest gains and losses. However, the Euro is down almost 3.0% over the last month. The Euro has found support and has bounced off lows seen earlier in the month after Russia evaded Ukraine.
While we think the Euro has carved out a relative bottom, a protracted war with Russia, harsher sanctions, and/or a deepening energy crisis could spell a disaster scenario for the common currency.
GBP
The British pound fell half a percent this morning, giving back nearly all of its gains from yesterday’s session. The sterling took a hit after data showed that Britain’s inflation rate surged to 6.2%, a 30-year high. While higher inflation should lead the Bank of England to continue their tightening path and a stronger sterling, traders are claiming today’s move is a simple example of “buy the rumor, sell the fact.”At the time of writing, Rishi Sunak, the Chancellor of the Exchequer is giving his Spring Statement. Sunak said the U.K. has cut its 2022 GDP forecast to 3.8%.
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