The U.S. dollar was in rally mode overnight. Indeed, the Bloomberg Dollar Index rose over a percent and wiped out its yearly losses.
Overview
Global equity prices took a hit overnight, and the bearish market sentiment will continue into the North American session. The hawks within the Federal Reserve made a case for higher interest rates, causing stocks to sink and the dollar to soar.
Yesterday, Federal Reserve Bank of Cleveland President Loretta Mester said she saw a “compelling economic case” for a 50 basis point hike at the last meeting. Similarly, the Fed’s James Bullard said he would consider a half percent move at the upcoming meeting. There are two more Fed speakers on today’s docket, both with the ability to move markets.
The economic docket is light, with the Conference Board’s leading indicators due out at 10 a.m.
Monex USA and US markets will be closed on Monday to celebrate President’s Day.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA will be closed on Monday for President’s Day
- Monex USA Online is always open
Monex USA introduces OPTIONS
With currency exchange rates in a constant state of flux, companies transacting cross-border face the risk of losing substantial sums of money if they fail to hedge their exposure to these shifts. Monex USA now offers a wide range of FX options that could help your business better manage risk. Learn More
EUR ⇓
Chirping from rate hawks was not limited to the U.S. as European officials also threw cold water on equities. ECB Executive Board member Isabel Schnabel warned that markets risked underestimating inflation, per Bloomberg News. Futures show that traders are now pricing in a slightly higher peak rate from the ECB but are also cutting odds that the central bank will cut interest rates later this year. Despite the hawkish tone in Europe, the Euro dropped half a percent as the dollar reigned supreme in the face of widespread risk-off trading.
GBP ⇓
The British pound sunk about half a percent against the U.S. dollar despite decent data released in the U.K. British retail sales unexpectedly rose in January. The volume of goods sold in stores and online rose 0.5% in January after a 1.2% decline in December. The median estimate of economists was for a 0.3% drop. The glass-half-full group has pointed to downward revisions in previous months that helped boost the month-over-month number. Regardless, the print is a good sign for the struggling economy. However, it was not enough to stave off the resurgent greenback.
