In the absence of much hard data globally yesterday and ahead of a very full data calendar for the second half of this week, the United States Dollar is trading with a bit of a negative tinge this morning after slipping during the Monday trading session across the board.
Overview
USD was unable to hold onto gains from the early morning as a globally optimistic mood took over, and European and Asian equities rebounded through Monday’s session. Though US treasury yields slipped higher through the course of trading, this followed a more global trend, and as US equities remained relatively flat, the Dollar played a bit of a victim.
Today appears to be more of the same, as investors hold their collective breath ahead of a set of US inflation data due out tomorrow morning. Though inflation has shown some moderation in recent months, the overall economic picture could give some room for an upside surprise, especially given yet another banner reading from US payrolls last Friday. Former St. Louis Fed President James Bullard provided some contrast to recent Fedspeak we saw last night, saying that 3 interest rate cuts from the Fed this year remain the base case. Though clearly he is no longer a voting member, his words are still an important contribution to the overall picture. Tomorrow’s CPI release is followed by the minutes from the Fed’s March meeting at 2 PM, and markets overall are tense with anticipation. Expectations are that inflation rose 0.3% in March and 3.4% on an annual basis, and anything at or above these expectations could materially shift overnight swaps on the Federal Reserve this year.
Not to be outdone, the Bank of Canada and the European Central Bank also have meetings on the docket for this week, and both are staring down the barrel of still-elevated inflation amidst a rather bleak economic outlook. Though forward-looking indicators in Europe, in particular, point toward better macro conditions, the European Central Bank may be forced to cut interest rates further and faster than the Fed to catalyze some substantial growth in the region. If a global economic recovery does come to fruition, and the red-hot US economy slows a touch as signs point to as a possibility, the Dollar’s future for the remainder of this year is very much in question.
What to Watch Today…
- US CPI, Wednesday 8:30 AM
- Bank of Canada Interest Rate Decision, Wednesday
- European Central Bank Rate Decision, Thursday
- US PPI, Thursday 8:30 AM
- UK GDP, Friday
- Monex USA Online is always open.
GBP ⇑
Pound Sterling seems to have found a bit of support this morning after drifting the last few sessions, gaining close to a third of a percent against the Dollar. Lacking major data points to drive its rebound, it’s likely that shifting central bank expectations and broad-based slippage in the Dollar are driving this morning’s swing upward. UK GDP is due out Friday for the month of February, slated to show ever so slight growth – though not necessarily good news, per se, it’s less bad than the recessionary territory the UK found itself floating through at the close of last year.
MXN ⇑
Though slipping a bit this morning, the “Super-Peso” is continuing its runaway strength of the last year from last week into this one and posting a gain this calendar year of nearly seven percent. While this morning, Mexico’s inflation came in slightly below expectations, this isn’t doing much to ding MXN’s strength as the nation grows closer to its general election in early June. MXN was more of a benefactor of strong jobs data from the US last week than USD itself and remains a popular party for carrying trades globally given its strength and high key interest rate.
