At the risk of sounding like a broken record, the United States Dollar is trading moderately softer this morning against all major currencies with a couple of notable exceptions.
Overview
Prices are being driven mostly by data releases around the world rather than domestically, with many different CPI readings released earlier this morning. US equities are set to open higher – once again – after the Bank of Japan did not, in fact, finally bring an end to its negative interest rates and deferred any possibility of doing so until at least the second quarter of next year. This isn’t exactly a surprise, given the pushback many of its officials gave last week against such speculation, but does make JPY the biggest loser on the G10 board. As the BoJ is the last of the G4 central banks to meet this calendar year, the remainder of price action will be driven by data due out this week before many firms take holiday breaks between Christmas and New Year.
Elsewhere around the world, Canada and the Eurozone both saw CPI releases for the month of November. The Eurozone’s annualized readings, both full and core, came in on expectations at 2.4% and 3.6% respectively, while the month-over-month reading contracted more than expected, shrinking 0.6%. Coupled with Lagarde’s rather hawkish words last week espousing resistance to cutting rates any time in the near future, markets are becoming a bit more confident in the ECB’s ability to actually beat back inflation to the central bank’s 2% target. Canada, by contrast, surprised higher than expected, showing a 3.1% rise in prices over the last year, contrasting Bank of Canada Governor Macklem’s espoused predisposition toward cutting interest rates earlier next year. All in all, it seems that the other major central banks around the world are more inclined to hold rates steady for longer than the Federal Reserve, though many Fed members attempted to push back against this last week.
Still to come this week – the final US GDP reading for Q3, UK CPI, UK GDP, and the PCE Deflator Index that the Fed prefers to watch. Though it’s not exactly likely we’ll see a major turnaround for the Dollar before the end of this year, expect some choppiness as the holiday markets move into full swing.
What to Watch Today…
- UK CPI, Wednesday,
- US GDP Q3 Final, Thursday 8:30AM
- UK GDP Q3 Final, Friday
- Monex USA Online is always open.
GBP ⇑
After taking some substantial losses to wrap up last week. Pound Sterling is riding high this morning ahead of two major data releases out of the UK later this week. Gilts rose this morning, following gains in US and European bonds, as investors assess the chances that the Bank of England may not cut interest rates as fast as some of its peers. Whether the data can hold later this week, however, remains to be seen – the larger economy in the UK is in quite a precarious position and flirting with a technical recession.
EUR ⇑
The single currency is also retracing through some of the losses of Friday and continuing yesterday’s trend upward, gaining just north of a third of a percent against the USD. This morning’s CPI reading was unequivocally good news for the economic region – showing actual deflation last month, and a core reading in line with expectations. As we enter the winter, however, the risk of increased energy prices driving resurgent inflation (especially given geopolitical conflicts straining oil supplies) could pose a threat to EUR’s rise this year.
