The United States Dollar enters the morning in familiar mixed territory, relatively flat against most major currencies.
Overview
Several minor data points came out of the US over the last 24 hours – JOLTS job openings, factory orders, and durable goods orders yesterday and this morning, ADP employment change and mortgage applications. All these readings combined have begun to paint a picture of a softening labor market and easing economic pressures inside the United States, which is welcome news for the Federal Reserve.Important to note, however, is that this softening has a high potential to push the US into a recession. Current models forecast a GDP downturn beginning as early as July if the Fed pushes another rate hike at its meeting in early May. Cleveland Federal Reserve President Loretta Mester said this morning she sees one more 25 basis point hike before the end of this tightening cycle, which could seal the US’s economic fate.Economic weakness inside the US is prompting a return to traditional haven currencies and nations showing resilience in the face of global uncertainty. Friday’s Non-Farm Payrolls release and next week’s inflation reading will help markets make up their minds about the path forward for USD.
What to Watch Today…
- No major economic events are scheduled for today
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AUD ⇓
The Australian Dollar enters the morning in a race to the bottom after the Reserve Bank of New Zealand hiked a surprise 50 basis points overnight. Though Governor Lowe of the Australian central bank left the door open for future rate hikes, the RBA’s hold compares poorly with RBNZ’s move and prompts a divergence between the two Antipodean currencies. Lowe’s statement that Australia is willing to tolerate higher inflation for longer to mitigate job losses stands in stark contrast to the rest of the world. It is driving AUD lower into today’s session.
GBP ⇑
Pound Sterling continues to lead the G10 board, and yesterday GBP touched its highest rate against the Buck since June of last year. Macroeconomic indicators are driving the pair primarily; recession concerns inside the US compare poorly with surprising, continued resilience in the UK economy. The Pound has gained nearly 5 percent against USD in the last month and shows signs of continuing upside.
