Daily Market Pulse
Market Awaits Fed's Barr, Eyes on Thursday's CPI
2 minute readThe US Dollar is trading broadly steady this morning, posting gains against most G20 currencies. When we look at the DXY US Dollar Index, the Greenback is easing a touch as a firm risk-on tone returned yesterday in US equity markets.
Asian stocks carried this tone on with the Japanese Nikkei Index posting a fresh 34-year high at the closing bell. On the economic front we have another light agenda today with only second-tier data releases.
Traders will be on the lookout to hear Federal Reserve’s Vice Chairman Michael Barr speak later in the day. There are no big potential market catalysts until Thursday’s CPI report, which is certainly a big one.
EUR/USD is up slightly on the day and seems to benefit a bit from expectations that the ECB will keep interest rates high for some time. Last month's jump in Eurozone inflation is providing that ammo. Yesterday, ECB official Boros Vujcic said the central bank does not foresee cutting interest rates before the summer and anticipates a gradual reduction in inflation within the Eurozone. German industrial output data was released this morning showing a fall of 0.7% month on month, 0.2% was expected.
GBP/USD has halted its 4-day winning streak and is consolidating around a major level. Positive risk-on sentiment and a slight decline in the US Dollar are supporting the currency pair. A former member of the Bank of England’s monetary policy committee, DeAnne Julius, said the central bank will not be able to begin cutting interest rates in 2024. She added that the escalating tensions in the Middle East could contribute to a new round of energy price rises, resulting in a new inflation shock.
USD/CAD has nudged a bit higher so far in today’s session. Steady oil prices can help stable the Loonie, but we see WTI hovering around $71 per barrel. Oil prices are moving sideways on fears over the escalation of the Israel-Gaza war into a regional conflict.
USD/MXN continues its slide today. Mexico’s inflation figures will be released today showing an expected slow decline in inflation. Banxico is likely to take a moderate approach to easing monetary policy soon which is supportive for the Peso.
