The United States Dollar is beginning this morning little changed after the Bloomberg Dollar Spot Index closed last Friday, posting a weekly loss of nearly three-quarters of a percent.
Overview
Most major currencies remain in tight ranges against the USD, consolidating most of last week’s gains. The market focus is primarily on several Federal Reserve officials who are speaking today, beginning with Raphael Bostic and Christopher Waller this morning. Chair Jerome Powell, originally slated to speak as well, is isolating from a COVID infection, so his remarks will be taken by Vice Chair for Supervision Michael Barr.
Little in the way of ‘new news’ is expected from any of these speakers, and Bostic’s prepared remarks have already struck a familiar tone – he expects just one interest rate cut from the central bank this year, once again placing policy divergence with other major central banks front and center. After last week’s surprisingly soft CPI print, there is an outside chance Fed officials this week could surprise markets with calls for further easing than currently expected, but typically voting members have shown reluctance to pivot their proposed paths forward without several months of evidence. Traders currently expect two 25 basis point cuts from the US central bank this year – more than Raphael Bostic sees in the cards, but still fewer than the Fed’s dot plot, last updated at its March meeting.
Elsewhere around the world, risk traders are on edge following the deaths of Iran’s president and foreign minister in a helicopter crash yesterday evening. Though oil prices have shown little reaction, gold at one point rose a percent in price. Iran’s political backing of many proxy groups in the region, especially given the fairly hot nature of its longstanding conflict with Israel over the last few months, makes this sudden change in leadership quite the geopolitical hot-button issue. All eyes will be on the nation in the next few months as President Ebrahim Raisi was seen as the likely successor to Supreme Leader Ayatolla Khamenei.
What to Watch Today…
- UK CPI, Wednesday
- S&P Global Composite PMI May Prelim, Thursday 9:45 AM
- Michigan Consumer Sentiment, Friday 10 AM
- Monex USA Online is always open.
NZD ⇓
The Australian and New Zealand Dollars have slipped a third and a half a percent against USD, respectively, this morning after Chinese government support for its ailing housing market was met with a decidedly tepid reaction. The Reserve Bank of New Zealand also announced its latest policy decision on Wednesday of this week, widely expected to follow the recommendation of its Shadow Board and keep interest rates steady once again. The Antipodean nations have faced down higher inflation than many of their G10 peers, but have shown a willingness to tolerate such inflation so as to not harm economic growth.v
JPY ⇓
Even after Japanese 10-year treasury yields climbed to their highest level since 2013, JPY is once again slipping against USD to the tune of nearly a quarter of a percent today. Expectations for the Bank of Japan have shifted in recent weeks toward more of a normalization of monetary policy in the face of continued weakness for the currency, but even another interest rate hike or two this year still leaves Japan’s interest rate far below those of its G10 peers and is quite difficult for JPY to overcome.
