After last week’s substantial Dollar Spot Index gains on the heels of a global central bank pivot toward dovishness, the United States Dollar is a touch on the back foot this morning.
Overview
Last week’s rally of close to a percent against most majors is indeed proving to be ever so slightly unsustainable heading into this shortened week. Many major markets around the world are closed through Thursday, Friday, and Monday for the Easter holiday, so as flows thin out, volatility may increase. Today’s currency moves are more in a correction territory than anything, ahead of a few Fed speakers this week and a PCE release for February due on Friday that could still be uncomfortably hot.
Over the weekend, the clearest signals of the potential for intervention emerged from Asian markets, with both Japanese and Chinese authorities stepping up their rhetoric and signaling support for their flailing currencies. This is contributing to a larger Dollar-negative atmosphere today. Japan’s vice finance minister for international affairs said that the yen’s movement in the last quarter is “not in line with fundamentals” and reserved the right for a direct intervention in the currency’s market. This ranks among the strongest verbal interventions on behalf of JPY to date and is having a moderate effect on the currency this morning. Chinese currency authorities, after the Yuan slid more than a percent on Friday, published a very strong currency fix price, signaling their support for the Yuan.
In Europe, Sweden’s Riksbank comes into focus this week, likely to follow the global trend and lean more dovish at its policy meeting. Equities across the globe are taking a bit of a step back today after a relentless rally on central bank tones last week.
What to Watch Today…
- UK Q4 GDP, Thursday
- PCE Deflator Index Feb, Friday 8:30 AM
- Monex USA Online is always open.
AUD ⇑
Capitalizing on the gains of the Chinese Yuan this morning, the Australian and New Zealand Dollars are also recovering some ground for the first time in three trading sessions. China’s larger economic recovery does appear to be returning closer to its projected track. Last week’s strong employment printout of Australia also makes it harder for traders to anticipate an earlier interest rate cut from the Reserve Bank of Australia, giving the currency some upside potential heading into the end of the quarter.
GBP ⇑
Pound Sterling, after an exceptionally tough week last week that saw the currency slide nearly two percent against USD at one point is regaining some ground today. Notable Bank of England hawk Catherine Mann is due to speak later today, and though she did drop her vote for a hike at last week’s meeting, it seems markets are expecting a bit of pushback from her on the central bank’s dovish tone in general. The UK’s final GDP reading for Q4 is also due out Thursday, just ahead of England’s Easter holiday.
