The U.S. Dollar is trading in weaker ranges as markets try to pick themselves up following a difficult week that resulted in a flight toward the buck’s safety.
Overview
As inflationary and other economic indicators show stubborn growth, the idea of disinflationary pressures lowering the chances of Fed action has started to fade. It seems quite clear now that the Federal Reserve will be combatting inflation with multiple interest-rate hikes.Today, the release of Durable Goods Orders for January contracted more than expected at (-4.5%) vs. (-4.0%) while the measure without transportation costs showed an uptick of 0.7% over 0.1% expected. Pending Home Sales will be out at 10 AM. We shall see what could turn the tide against the buck this week, if anything, as now traders keep adding bets that the Fed’s terminal interest rate ends up at 5.4% when just a month ago most thought it would be capped at 5.0%.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
The Euro is mounting a comeback after falling to its weakest point in over six weeks based on the sharp buck’s rise as markets fear central bank action will not cease anytime soon. One major item that will play into whether the European Central Bank accelerates its pace of hiking will be tomorrow’s release of Consumer Price Index figures for the Eurozone.
With expectations of a half percent rise, we see Euro very volatile to the data and will be pulled strongly one way or the other depending on its accuracy. It will severely depreciate if another deflationary reading follows the negative one in January.
GBP ⇓
Sterling is up by over half a percent and going with news of the Northern Ireland protocol being welcomed by all across markets. While the details of the revamped agreement are geared towards improving the flow of goods, it is important primarily as a first step towards improving relations with the EU. EU Commission President Ursula Von Der Leyen and Prime Minister Rishi Sunak looked to foment a better relationship at the risk of the PM losing popularity within his Conservative Tory party.
