The U.S. Dollar is trading in quiet ranges as the globe comes back to full activity post-holidays.
Overview
The year is off to a quick start when it comes to speculation over the Fed’s will to keep hiking interest rates into the future. Yesterday, Fed Chairman Jerome Powell did not give much guidance in prepared remarks concerning the importance of central bank independence at a forum in Sweden. After official commentary from two voting FOMC members, bankers and other industry leaders, such as JP Morgan’s CEO Jamie Dimon, are worried that the Fed may see it necessary to hike interest rates beyond a 5.0% terminal rate.In terms of data that can influence the Fed’s mentality, markets are awaiting Thursday’s inflation figures in the form of the Consumer Price Index for December. Expect the flows of FX to also be driven by whatever news comes out of China, which is struggling with a surge in COVID-19 infections that are also preventing burden-less travel.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇑
The Euro is trading at its best level since June as bets increase that the European Central Bank will maintain a tightening path. While the Eurozone experienced some disinflation in energy costs, food, as well as other items, remain at an increasing pace of price growth. The need to raise interest rates does not only stem from wanting to combat inflation but also to make up for years of low-interest rates that even dipped into negative territory.
Deposits were being punished as the ECB was interested in pushing for lending and investment, but for years many savers have demanded a change. They may start getting it this year if also the region can keep overcoming challenges and doom-gloom scenarios.
GBP ⇑
The Pound is a bit weaker this morning based on negative outlooks for the British economy. Adding to the Bank of England’s pessimistic forecasts, traders are concerned that the mix of leftover Brexit damage, uncertainty over taxes and spending, as well as the current challenges to trade with the EU, could prolong the tough times. In December, we learned that Gross Domestic Product had already been falling into contractionary territory. Any signs of global flourish may uplift Sterling, but there are dark clouds ahead.
