Daily Market Update

Volatility Returns Following Higher Inflation, ECB Decision

June 10, 2021

Global markets were muted overnight as traders awaited both the European Central Bank decision and U.S. consumer inflation data.

Overview 

However, the wait is over, and volatility has begun to pick up.

U.S. consumer prices in the U.S. rose 0.6% in May after rising 0.8% in April. The reading is higher than the 0.5% forecast by economists. The year-over-year reading came in at 5%, higher than the 4.7% estimated. The so-called “core reading” which strips out food and energy rose 0.7% month over month, also higher than estimates. The dollar has gained a touch following the data as higher prices may cause the Fed to have to tape its current policy sooner than they would like. Nevertheless, the Federal Reserve has maintained that the current spike in inflation is “transitory.”

A separate report showed that jobless claims declined for a sixth consecutive week. Claims decreased by 9K to 376K, showing continued improvement.

We will also be keeping an eye on developments at the G7 meeting in Cornwall.  For many leaders, this is their first in-person meeting since the beginning of the pandemic.  The focus of the meeting will be to end the pandemic globally by the end of next year.  Ahead of the summit, news broke that the U.S. plans to buy 500 million doses of the Pfizer vaccine to donate to the rest of the world to help with the effort.

 

What to Watch Today…

  • No major events scheduled today

View Economic Calendar

 

EUR 

EUR/USD volatility has picked up this morningfollowing the ECB interest rate decision, but the pair appears to hold recent ranges. The ECB left its policy unchanged with a negative deposit rate of -0.5%. It also affirmed its accommodative stance and the size of its purchase program (1.85 T EUR). The decision was widely expected.

In the coming moments, European Central Bank President Christine Lagarde will hold a press conference and the event looks to be more significant than the decision itself.  We expect Laggard to provide some detail into the factors that influenced policymakers’ decisions.  Traders will parse her words as to what their thinking might be to end the year.  That said, it is entirely possible that the common currency will end the day largely within recent ranges.

CAD

Commodity-based currencies were also mostly flat against the U.S. dollar even as the price of oil continued to tick higher. The Canadian dollar remains within 1% of its 2015 high against the U.S. dollar. There is no Canadian data due out today.

The Norwegian krone was the biggest mover in the commodity space. The krone extended losses after consumer price index data for May fell below economists’ expectations.

 

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