The U.S. dollar is mostly unchanged, seeing a small decline versus the Euro but rebounding versus the New Zealand dollar.
Overview
Much of the talk in financial circles is about the disparity that is being exacerbated by Covid-19 and the following recovery. While economic data in the U.S. and other rich nations have been gangbusters, much of the developing world is struggling to get the virus under control.
India reported a world record one-day jump in cases as the country’s health system is under immense pressure. Struggles in the developing world present a challenge to the overall global growth narrative. If the globe stumbles further, the dollar could be a major beneficiary.
All eyes this morning will be focused on the European Central Bank’s press conference. Later, attention will focus back on domestic economic data. U.S. existing home sales for March are due out at 10 a.m., followed by Kansas City Fed Manufacturing Index at 11 a.m. Earnings season will continue today including Southwest and American Airlines
What to Watch Today…
- Existing Home Sales at 10 a.m
EUR ⇑
After two days of losses, the Euro gained against the U.S. dollar overnight ahead of the European Central Bank policy decision. The common currency was able to hold onto its modest gains after the ECB failed to surprise. The central bank maintained its current policy, made no changes to its policy statement, and reiterated its promise to continue its PEPP purchases.
ECB Chief Christine Lagarde will begin her press conference at 8:30 a.m. which could cause modest volatility for the EUR/USD pair. However, options prices show that traders are expecting the press conference to be a snoozer.
Elsewhere, the lower house of German parliament passed a new law that would allow the government to impose curfews and lockdowns, a reminder that the pandemic is still a large issue for the bloc’s largest economy.
GBP ⇓
The British pound initially popped higher against the U.S. dollar overnight but quickly gave up those gains. The Sterling’s downward momentum is picking up steam in early trading with GBP/USD down half a percent. The sharp move lower is a bit of a headscratcher considering the fundamental data out of the U.K. was solid. U.K. manufacturing business optimism rose to the highest level since 1973. Goldman Sachs points out that the survey only covers manufacturing so tomorrow’s PMI which includes the service sector will hold more weight.
GBP/USD is trading near its 55-day moving average, which bears watching.
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