The U.S. Dollar gained yesterday and modestly extended those gains overnight.
Overview
The Bloomberg dollar index rose to its highest level since June 2020. The recent pop for the dollar can be attributed to increased and likely coordinated hawkishness from the Federal Reserve. Yesterday, Fed Chief Jerome Powell said that many officials had noted that “one or more” 50 basis point hikes could be appropriate to tamp down the quickest inflation in 40 years. The Fed’s Mary Daly joined the chorus by saying the central bank “will likely be taking a 50-basis point increase in a couple of meetings.”S&P Global PMI for services and manufacturing will cross the wire at 8:45 a.m. While notable, traders will likely continue to focus on increased bets that the Federal Reserve will have to act aggressively to reel in inflation. Earnings season will also continue today.
What to Watch Today…
- PMI data at 9:45 a.m.
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CAD
The Canadian dollar was another victim of the surging U.S. dollar, falling 0.7% overnight. A slip in the price of oil to back under $102 a barrel added to the loonie’s misfortunes.Early morning fundamental data has done little to help the Canadian dollar recoup its losses. Canadian retail sales squeaked out a small 0.1% month-over-month gain, beating estimates of a 0.5% decline. A separate report showed that Canadian factories raised prices by a record 4.0% in March, highlighting increased inflation pressures.
GBP
The sterling took a pounding overnight, falling as much as 1.3% before recovering slightly. The overnight drop comes after three separate reports showed that the increased cost of living is slowing down growth in the United Kingdom. A gauge for consumer confidence fell to its lowest level since the 2008 recession. Retail sales fell more than expected last month and S&P Global’s PMI for both services and the economy as a whole fell to a three-month low. The data has caused traders to become more cautious of their interest rate hike predictions for the U.K. This comes as traders are increasing bets the Fed will have to act more aggressively, widening the expected interest rate differential between the two. GBP/USD is now at the lowest level since November 2020 when the U.K. was in full coronavirus lockdown.
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