Global risk tone drove markets through yesterday’s session and overnight, pushing the United States Dollar into a steady decline over the past 24 hours.
Overview
The mood across the world is, generally speaking, much more positive than yesterday at this time. Treasury yields fell on the heels of several speakers from the Federal Reserve, most of whom struck a tone of cautious optimism about the path of this tightening cycle. While the Fed is not done raising rates, it appears the end of this cycle may be in sight, according to several regional Presidents. Despite conflicting signals from other major economies, excitement is building globally about the prospect of disinflation, driving equities up and demand the Buck down.
Elsewhere, China announced overnight additional measures to boost its economy in the form of housing stimulus, a huge boon to global risk sentiment. A slight hawkish tone from Fed officials showing their commitment to a rate hike at the end of this month is stemming the bleeding for the Dollar, keeping losses smaller than they could be on this news. NATO members are also meeting in Vilnius, Lithuania, this week and putting forth a solidly united front as Turkey agreed to advance Sweden’s bid for membership. This translates to both EUR and GBP strength today, and a bout of strength from TRY leading most emerging-market currencies higher as risk tone continues to improve.
Looking ahead this week, US CPI numbers due out tomorrow morning continue to be at the forefront of domestic and international markets’ minds. As highlighted yesterday, any downside miss could prompt further downside potential for USD ahead of the media blackout period preceding the Federal Reserve’s meeting at the end of this month.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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GBP ⇑
Pound Sterling hit a 15-month high against USD this morning on the heels of a speech from Bank of England Governor Andrew Bailey yesterday. He highlighted the continuing specter of the wage-price spiral facing the region, and data this morning backed him up, showing a surprising jump in UK wages even in the face of rising unemployment. Though the Bank of England’s path to tamp inflation remains quite difficult while grappling with a dim macroeconomic outlook, it’s clear that several more hikes are in store, keeping demand for GBP strong.
JPY ⇑
Japanese Yen continued its winning streak against USD this morning before retracing a bit, posting a fourth consecutive day of gains. The good news out of China is providing the currency with a much-needed life raft after hitting an 8-month low against the Buck at the end of June. Falling US treasury yields, shrinking the gap between those of the two nations, is also driving strength for JPY, gaining roughly 3 percent since last Wednesday.
