The U.S. Dollar is mostly flat to start the week, but with notable losses to some commodity-backed currencies.
Overview
The Mexican peso is experiencing immense pressure in early trading, falling nearly 2% against the U.S. dollar. Outside of the rally against MNX, the greenback has not been able to take advantage of a rare risk-off day. Global bond yields have spiked as traders pour on bets that additional fiscal stimulus and vaccine success will promote growth, but also inflation.
On the stimulus front, President Biden’s $1.9 trillion plan is headed for a House vote this week and will likely pass and head to the Senate.
This morning’s economic docket showed January Chicago Fed index rose to 0.66. However, December’s print was downwardly revised. Later, the Dallas Fed Manufacturing survey will cross the wire. This week is not the busiest for fundamental data but there are still a number of events to monitor. Fed Chairman Jerome Powell will deliver his semi-annual monetary policy report to the Senate tomorrow. Expect Powell to continue to lobby for additional fiscal support to complement monetary policy. G20 finance ministers and central bankers will meet on Friday.
What to Watch Today…
- Dallas Fed Manufacturing at 10:30 a.m.
AUD ⇑
The Australian and New Zealand dollars were the biggest gainers overnight. The Australian dollar touched its strongest level since March of 2018 after the Reserve Bank of Australia resumed purchases of three-year bonds. Despite policymakers stating maintaining that rates will not rise for the next three years, money markets are pricing in a 30% chance rates will have to rise by the middle of next year.
The New Zealand dollar found support after S&P lifted the country’s credit rating to AA+. The Antipodean pair also benefited from rising commodity prices.
CAD ⇓
The Canadian dollar was unable to join the rally in commodity-backed currencies overnight, even as Brent Crude remains above $63 a barrel. However, the loonie remains within striking distance of its strongest level since April of 2018. The economic docket is light today. Bank of Canada Governor Tiff Macklem will give a speech tomorrow morning.
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