The U.S. dollar is extending its rally this morning, pushing stronger against all its G10 counterparts.
Overview
The dollar’s resurgence follows last week’s narrative: inflation worries and rising treasury yields are weighing on risk sentiment and benefiting the safe-haven greenback. Nasdaq futures are down nearly 2% this morning after yield on the 10-year Treasury yield touched 1.6%. The tech-heavy Nasdaq is down 8% over the past month.
Traders around the globe have been pricing massive growth for the American and global economy on the recent success of vaccine distribution and the likelihood of fiscal stimulus, but that growth comes with the potential for rising inflation. The U.S. Senate passed President Joe Biden’s $1.9 trillion package over the weekend and the House is expected to “easily” pass a vote on Tuesday. We can comfortably bet that Biden will sign the bill into law this week before the previous relief package expires on Sunday.
There is no top-tier data or Fed speakers today or tomorrow, so expect the greenback to continue to take its cues from Treasury and stock markets. We will get a fresh look at inflation data on Wednesday morning. The headline print of the consumer price index is expected to show price pressures ticked 0.4% higher on a month over month basis in February. Year over year, consumer inflation is expected to register at 1.7%. This still below the Fed’s target of 2.0%, but a good deal higher than the 1.4% reading in January.
What to Watch Today…
- No major events scheduled for today
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EUR ⇓
The Euro was just one of the many currencies that took a beating against the greenback overnight. EUR/USD is down 0.4% from Friday and is now at the lowest rate since late November.
While the bulk of the move is likely due to widespread dollar strength on risk aversion, the European economic docket did not do the common currency any favors. German industrial production contracted 2.5%, well worse than the forecasted 0.4% decline.
CAD ⇓
The Canadian dollar is modestly weaker against the mighty greenback today. The loonie was unable to take advantage of a spike in the price of oil.
Crude futures are giving back some of their gains at the time of writing but the price of the crude traded near $70 a barrel overnight. The pop higher came after Saudi Arabia said the world’s largest crude terminal was attacked yesterday by a drone. The missiles were intercepted and output was unaffected, but the threat heightened tensions in the Gulf was enough to send the price flying.
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