While moves in the currency market were muted at the beginning of the week, volatility exploded during yesterday’s session led by impressive gains for the U.S. dollar.
Overview
The greenback was able to build on its momentum overnight by gaining against most of its G10 counterparts. The Bloomberg Dollar Spot Index rose to its highest level in 10 days and is close to a three-week best.
The dollar has benefited from its traditional safe-haven status as global equity markets spiraled lower yesterday amidst a sell-off in bonds. Global bonds have steadied overnight which should give risk sentiment some reprieve. Still, the greenback remains near its strongest level of recent ranges.
This morning’s economic docket is a busy one. Personal income in January rose 10%, beating expectations of a 9.5% increase. Income was boosted by stimulus checks. Personal spending was slightly lower than expected with the headline reading coming in at 2.4% month over month. PCE prices, the Fed’s favorite inflation gauge, showed price pressures at 1.5% year over year, still below the Fed’s 2% target. The dollar has shown little movement in the aftermath of the solid data, likely because the prints were close to expectations.
Later, the University of Michigan consumer sentiment survey will hit the wire. U.S. Treasury Secretary Janet Yellen and other finance ministers and central bankers from the G20 will meet virtually today.
What to Watch Today…
- University of Michigan consumer sentiment at 10 a.m.
JPY ⇑
The safe-haven Japanese yen and Swiss Franc were the best performing currencies overnight as worries of persistent inflation dragged equity markets and boosted the appeal of havens. However, the yen was unable to take advantage against the resurgent U.S. dollar. USD/JPY spiked higher and touched a five-month high before giving back some of those gains. The dollar is up nearly 1% this week, which is the biggest monthly gain since January.
On the other side of the risk spectrum, the Australian and New Zealand dollars were the biggest losers on the day.
GBP ⇓
The British pound crashed back to earth after posting impressive gains for six consecutive days versus the U.S. dollar. GBP/USD is down 1.5% over the last two days and is currently at its weakest level in just over a week.
There was no major economic data released in the U.K. today, so the move is likely a combination of sterling profit-taking and a resurgent U.S. dollar.
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