Daily Market Update

U.S. Dollar down to its weakest in 2 months

January 13, 2022

The U.S. Dollar is trading in weak ranges, falling to its weakest point overall since start of November, per the Bloomberg Dollar Spot Index. 

Overview

The feeling around trading floors is that the buck may have peaked as now there is no doubt that the Fed will indeed plan to hike a few times this year. With Jerome Powell continuing as Fed Chairman, the cautious approach also continues and his comments on a slower economy this year is also an indication that the Fed could keep an easing mentality if indicators start underperforming.

Producer Price Index figures revealed inflation is indeed high amongst suppliers. PPI year-over-year came in almost as expected at 9.7% vs. 9.8%. Initial Jobless Claims for the start of January came in higher than expected at 230K over 200K. No matter what, the Fed has announced its plans for the year and now it is a matter of seeing if they go through with increasing borrowing costs. The tide is not dollar-friendly, so we will see how sustainable the rally is across the board. A deluge of December data, including Retail Sales and Industrial Production, hits us tomorrow; perhaps it can make a further impact.

 

What to Watch Today…

  • No major economic events are scheduled for today

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EUR

The Euro is indeed back to its highest value since November as the world digests the U.S. Fed’s promise to hike interest rates 3-4 times this year. One thing to note is that the outlook for European stocks is positive and that there are growing voices countering Philip Lane’s, EU Chief Economist, idea that the European Central Bank should not do even one interest hike this year. Unlike the Fed, all the ECB has done is reduce their bond purchases while stating that inflationary growth alone does not seem to merit increasing interest rates. We will see throughout the year how committed ECB President Christine Lagarde will be to this stance.

 

GBP

Sterling has reached its highest point since the end of October based on the global momentum and belief that this year will be good for trade. Despite some optimism, Britain is still coping with how to accept the Prime Minister’s apology and if it is perhaps too little too late to avoid opposition calling for a vote.

Two polls conducted regarding whether PM Boris Johnson should resign following multiple scandals of the breach have concluded that the majority of adult voters would favor him quitting now. Turbulence in the U.K. currently not sinking Pound, but there is a lot to watch out for.

 

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