Daily Market Update

Overview

Last week, the Bloomberg Dollar Spot Index slid as much as a percent and a half as USD broadly lost value amidst a busy week of data releases, central bank decisions, and Fedspeak. US stocks also had their worst week since October, but do remain close to their all-time highs reached earlier this month. Bitcoin, by contrast, has hit yet another record high this morning, opening just above $72,000 today.

Federal Reserve Chair Jerome Powell’s testimony to Congress last week was the obvious headliner, reinforcing his view that the Fed is ‘not far off’ from gaining the confidence needed that inflation is continuing to fall back into line with the target to begin cutting interest rates. Markets now expect such a pivot to happen in June, though this is still definitely up for debate. Powell’s relatively dovish tone contrasted with some of his peers around the world, as the Bank of England and the European Central Bank, in particular, do not look inclined to ease their respective key interest rates before the second half of this year. The Fed has said time and time again that it would be looking for softening in the labor market to drive down inflation, and it appears markets desperately wanted Friday’s non-farm payroll print to be just that, even as mixed as it was.

The data calendar for this week is substantially calmer than last, but does see inflation readings from the US as well as many individual nations in the Eurozone. Ahead of the Fed’s meeting next week, this set of releases is likely to be the primary driver of price action.

What to Watch Today…

EUR ⇓

After the European Central Bank held interest rates steady at its policy meeting last week, the single currency is slipping a touch against USD today. It’s important to note, however, that EUR gained just shy of a percent of ground last week, so EURUSD prices are still worse for dollar sellers than they were last Monday. As it stands now, markets are targeting a June interest rate cut out of Europe as well, but these expectations remain in flux, with questions on the overall health of the Eurozone economy continuing to swirl.

JPY ⇑

Japanese Yen appears to be on a runaway train to greatness ahead of the Bank of Japan’s policy meeting next week, gaining yet another two-tenths of a percent to kick off this week. Speculation surrounding the BoJ’s potential to end the world’s last negative interest rate continues to boost the Yen. Data released overnight also showed Japan narrowly avoided a recession in the second half of last year, which could be just the fuel the BoJ needs to change that interest rate up to at least a flat zero on March 21.