The U.S. Dollar is trading in stronger ranges after an eventful week that established a very hawkish stance for the Federal Reserve in regard to their willingness to hike interest rates quicker than anticipated.
Overview
Once more, the buck is benefitting from a bit of central bank policy divergence as officials from different regions have expressed opposite views.At the moment, the probability of an interest-rate increase of 50-basis-points for their March 16th meeting stands at 63.0%. Comments yesterday by St. Louis Fed Chair James Bullard helped cement that this course of action is unwelcome by equity markets, hitting a major drop yesterday and affecting other indices overnight.We shall see what comes up next week with a slew of data highlighting January’s inflationary growth in the form of Producer Price Index and the very crucial Retail Sales. Mid-month concerns about Ukraine and Russia potentially entering conflict are also reverberating across energy markets with some experts warning that something could happen once the Olympics are over.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro has been roller-coastering all week as commentary from various officials has lowered expectations of a tightening-minded European Central Bank. While statements during her post-decision press conference signaled the ECB is going to consider a hike for the year, ECB Chair Christine Lagarde warned in comments that there cannot be a rush to take tightening action.
Naturally, the momentum Euro has mid-week faded quickly. Expect more of the same up-down action as we open up fully globally, or gradually, to get away from the pandemic inactivity.
GBP
The Pound gained some ground-based on its impressive Gross Domestic Product figures overnight. Year-on-Year GDP at 6.5% represents the fastest pace of growth for the British economy since World War II. We think that this helps, but word from Bank of England officials have echoed ECB sentiment that while raising interest rates to combat inflation, do not expect perpetual tightening rounds.
Sterling might be held back slightly, but now evidence is there the economy has moved beyond pandemic worries but will need to refocus on pre-pandemic woes.
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