The U.S. Dollar is trading in weaker ranges, living up to the characteristics of a current ever-changing environment in the midst of an economic growth debate.
Overview
Fears have grown in some sections of trading and investment that the pandemic, war, and supply-chain woes have left a very heavy toll dragging the economy into “stagflation” for a long time. On the other hand, there is the side feeling that we have gotten through the very worst of the pandemic only to recover and re-open more confidently, with only better things to look for ahead, perhaps even a cease-fire to the Ukraine-Russia conflict.While markets seesaw between worry and hope, expect the buck to continue finding new pockets of depreciation against some pairs while staying dominant over others, as is the case with the Japanese Yen. Treasury bond yields keep increasing in the U.S. and Europe as expectations of inflation and higher interest rates contrast dramatically with the accommodative policies of the Bank of Japan.Additionally, the buck has also gained ground against another typical safe-haven asset: the Swiss Franc. Oil prices and food costs continue to challenge central banks and governments, and a Ukrainian official said the solution would simply be to stop the fighting. The U.S. is currently trying to prevent Russia from selling stolen Ukrainian grain to African nations, a task that may prove to be too difficult after years of pandemic and obstacles to trade.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro rose this morning after the release of Gross Domestic data impressed. The final reading of Q1 GDP revealed an actual pace of 0.6% vs. the 0.3% from the second revision. This means that the Euro-zone has avoided recessionary pressures and that the European Central Bank can be more reassured about increasing interest rates to get away from the negative territory for the first time in years. Expect tomorrow to be a closely monitored day of commentary from Christine Lagarde as she defends taking away stimulus as well as shedding away the balance sheet of sovereign bond purchases.
JPY
The Japanese Yen has reached a fresh new low of over 20-years against the greenback as rising yields elsewhere play into the divergent monetary policy dynamics that have kept the USD buoyant. The difficulty in visiting Japan after years of very strict anti-COVID measures and the subsequent closing of business deals, as a result, have made for a very poor outlook on the Japanese economy, one that had already dealt with “stagflation” prior to the pandemic.
An unenthusiastic Tokyo Olympics never sparked much in terms of hopes for a more excitable economic opportunity and rather showed that limits exist in fully trusting the outside world. As BOJ Governor Haruhiko Kuroda explained on Monday, their policy will remain ultra-loose as “tightening is not at all a sustainable measure.”
