Daily Market Update

Dollar Slips; Commodities Rise

October 12, 2021

The U.S. dollar is a touch lower this morning with most of the losses coming against commodity-based currencies. 

Overview

Equity market futures are in the green this morning after dipping yesterday.  Risk sentiment appears to be trying to shake off the fears of rising energy prices and inflation.  Third-quarter earnings season begins in earnest for financial firms so risk sentiment can turn on a dime and dictate the direction of the greenback.

The economic docket is light today, but Atlanta Fed President Raphael Bostic will speak about inflation at 12:30 p.m.  Minutes from the latest FOMC meeting will be released tomorrow afternoon.  The Consumer price index will be watched closely and is set for release tomorrow morning.  U.S. Producer prices are on the docket for Thursday.

 

What to Watch Today…

  • No major economic events scheduled for today

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AUD 

Commodity-based currencies are on top this morning as the price of oil held above $80 a barrel as the global energy crisis intensifies ahead of the winter months.  The Norwegian krone and the Swedish krona were the biggest winners.  The higher cost of metals is also boosting the Australian and New Zealand dollars and the South African rand.  The price of aluminum is the highest level since the summer of 2008.

 

GBP 

The British pound has experienced heightened volatility.  The sterling was lower most of the night as futures show that bets against the British pound are growing.  Bloomberg News pointed out that bets against sterling are at the highest in two years.  The price action is curious because traders are also pricing in multiple interest rate hikes by the Bank of England, which historically have helped the currency.  Instead, traders are betting that the BoE is indeed making a mistake and that higher interest rates could derail the British recovery.

The sterling was able to make a quick recovery in early trading following a jobs report that showed U.K. payrolls rose above pre-pandemic levels.  The U.K. tax authority said that payrolls climbed 207K last month, a record.  A separate report by the Office for National Statistics showed job vacancies rose to a record high 1.2M.  The strong jobs data, paired with rising inflation, is likely to give the Bank of England the scope they need to proceed with their rate hikes.

 

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