Even after retracing a bit through yesterday’s session and into this morning, the United States Dollar is still on track for its third straight weekly gain.
Overview
The Bloomberg Dollar Spot Index is paring its weekly gains, down 0.1% but still in the green to the tune of 1% for the week. Equities are also taking a positive tone, led higher primarily by tech stocks as the S&P 500 is set to open above its record high, and the Nasdaq index looks to open today nearly a percent higher than yesterday’s close. This paves the way for a bit of small weakness for USD today, but not nearly enough to erase the rest of the week’s gains.
In the absence of much major data out of the US today, it seems markets have simply seized on an opportunity to moderate some of the moves this week. The tinge for the Dollar Tuesday and Wednesday was decidedly positive, with much more muted moves following yesterday. Due out later this morning is the University of Michigan’s survey on consumer sentiment, an important leading indicator for consumer confidence in the US. Many major economists have spelled doom-and-gloom vibes for quite some time now in regard to the health of the larger US economy, but expectations for a substantial downturn have thus far failed to materialize. Nevertheless, soft data remains important, especially leading up to what promises to be a tumultuous election later this year.
The mood across the world this week, however, remained quite grim as China’s equity rout for the month of January continued. The largest brokerage in China allegedly suspended some short selling, and some gauges of Chinese stocks closed the worst week since March as many call into question the legitimacy of the nation’s 5.2% GDP reading for last calendar year. Sentiment also continues to be dampened by ongoing struggles in the Red Sea, as US coalitions and Houthi rebels continue to trade strikes even after President Joe Biden admitted that airstrikes are not serving to halt further attacks.
What to Watch Today…
GBP ⇓
After standing remarkably strong in comparison to its G10 peers in the front half of this week, the Pound Sterling is declining to the tune of a quarter of a percent this morning after UK retail sales declined substantially more than expected for the month of December. Showing a reading of -3.2%, this is decidedly bad news, especially in the face of renewed inflationary pressures. The UK economy clearly did not get the holiday boost it was counting on, and while the Bank of England continues to say rates will be higher for longer, the fight against inflation continues to come at the expense of consumers.
JPY ⇓
Japanese Yen pared losses this morning to trade flat on the day but is set to wrap the week sliding nearly two percent weaker against USD. Weak inflation data overnight served to pour further proverbial cold water on speculation that the Bank of Japan would end its negative interest rate policy any time soon, as consumer price growth slowed to 2.3% in December. JPY overnight hit a seven-week low, prompting Finance Minister Shunichi Suzuki to once again say that the government is closely watching foreign exchange movements and buoying the flailing currency slightly.
