The U.S. Dollar continued its surge against all pairs as markets took in good economic data from yesterday that gives the Federal Reserve merit for wanting to tighten down the line.
Overview
While a March guarantee is not a guarantee, markets seem to be pricing it in and giving the dollar its due in a world where other major central banks may hesitate. No matter what, we are entering a very volatile time where hopefully the variant lessens in medical as well as economic impact, but where the pace of growth will be the most crucial item to keep eyes on.If there is a slowdown or outside factors, like a conflict, the Fed could change its mind and we emphasize that from the way Jerome Powell spoke, it seemed he wants flexibility. Data this morning did show a contraction in Personal Spending and a slower pace than expected for Income in December.Oil prices have gone up for six consecutive weeks as the globe gears up for what could be turbulence in energy markets if Ukraine issues are not resolved and relations deteriorate between Europe and Russia. Apple was reported to show significantly better earnings than expected so we will watch for how the rest of the equities hold up. Per the Bloomberg Dollar Spot Index, this is the strongest buck overall since Thanksgiving time.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro is trading around its weakest levels since June 2020 as the differences between the U.S. economic situation and Europe keep showing in the form of disappointing indicators. Gross Domestic Product and other data for nations such as France and Spain impressed a little, but Germany is the big brother in trouble. While there is growth in the other larger economies of the EU, German GDP revealed a deeper contraction than estimated at (-0.7%) vs. (-0.3%) expected.
In general, Industrial Confidence is down for the Euro-zone. Ultimately, the European Central Bank might have a good excuse to hold on and wait for contractions across data to start fading before applying higher interest rates.
GBP
Sterling is at its weakest point since Christmas without any data today affecting it other than the strong week the dollar has enjoyed based on Fed confidence and plans. The Bank of England will meet next week on Thursday when they are highly expected to raise their benchmark interest rate, currently at 0.25%.
The market has already priced in a 25-basis points increment, so if there is a change of heart from Bailey and other officials, Pound could really sink. Volatility moving forward will be high as nations cope with the last challenges of Omicron and look to get rid of the supplies crunch affecting prices everywhere.
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