While running the risk of sounding like a broken record, the U.S. dollar gained overnight.
Overview
We are in an environment where the greenback can do no wrong, apparently. The safe-haven currency rallies when stocks sell-off, but as we saw yesterday afternoon, the dollar can hold those gains even as risk appetite rebounds. Diverging monetary policy is the driving force behind the greenback’s ascent to near two-year highs. U.S. Durable goods for March missed estimates coming in at 0.8% instead of the expected 1.0%. However, February’s print was upwardly revised. The Philly Fed Non-manufacturing index fell to 29.3 from 32.4 in the month prior. The disappointing data has not yet dented the dollar’s supremacy. Later, the S&P CoreLogic Case-Shiller home price index, the Richmond Fed, new home sales, and consumer confidence will all hit the tape. In addition, earning season continues with big names such as Alphabet and Microsoft reporting.
What to Watch Today…
- Slew of fundamental data; earnings season
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EUR
The Euro’s slide against the U.S. dollar continues with the common currency ceding an additional 0.3% overnight and reaching levels not seen since the onset of the pandemic. The Euro has come under renewed pressure this month on diverging monetary policy. Traders have increased bets for aggressive tightening by the U.S. Federal Reserve. And while traders have certainly increased bets the European Central Bank will have to tighten, the pace of expected action is much slower. In addition, recent economic data has highlighted the challenge the ECB faces: balancing slower growth with heightened inflation. At some point, the Euro will find a floor. In the meantime, Euro weakness appears to be a one-way street.
AUD
The Aussie dollar was able to buck the trend of the strengthening U.S. dollar. China, Australia’s most important trading partner, announced measures to support its economy in the face of new covid hurdles. China’s central bank pledged to support “industries and small businesses hit hard by the pandemic.” The People’s Bank of China also reiterated it would keep liquidity reasonably ample. The Aussie rallied as much as 0.7% before giving back about half of those gains.Other commodity-based currencies were able to sneak in modest gains. NZD/USD is up one-tenth, for example.
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