Another round of bearish Dollar action after the latest U.S. inflation data, prompting gains in risk-on assets and most of the other major currencies.
Notable News & Economic Updates:
FDA halts use of Johnson & Johnson Covid vaccine due to rare blood-clotting issues in six women
China’s trade surges as global economy recovers from pandemic
U.S. consumer prices post biggest gain in 8-1/2 years as economy reopens
Oil climbs 5% on signs of increasing crude demand
Dogecoin spikes 400% in a week, stoking fears of a cryptocurrency bubble
Bitcoin tumbles after Turkey bans crypto payments citing risks
S&P 500 edges higher to another all-time high, on pace for 4th straight positive week
Treasury yields rebound but still below recent highs
Chinese economy grew 18.3% q/y as expected in Q1 2021
Dollar Falls as Inflation Doesn’t Meet the Hype
Looking across the asset classes, it looks like a risk-on kinda week for traders as cryptos, oil, and equities trend higher, while the Dollar and Treasury yields fell. The main driver may have been the dip in U.S. Treasury yields this week, which were likely reacting to the latest U.S. inflation data on Tuesday.
The U.S. inflation latest read didn’t far exceed the high expectations built on the massive government stimulus and monetary easing moves over the past year, coming in at just a tick higher than expectations at 0.6% m/m.
Apparently, this wasn’t enough to spark speculation of a Fed tightening move sooner rather than later, which is likely why we saw the dip in Treasury yields and the U.S. dollar as traders took a step back from that paradigm.
And without any other major catalysts to attribute to this week, this dynamic was the likely catalyst for the outperformance in the equity, crypto, and commodity markets through the latter half of the week.
Besides U.S. Dollar weakness, oil’s dominant run higher against the other asset classes likely got a boost from a fall in oil inventories, indicating that oil demand continues to rise from the severely depressed levels thanks to the coronavirus pandemic last year.
USD Pairs
- Fed head Powell: Outlook has brightened substantially, but there are risks
- U.S. consumers raise outlook for inflation, labor market, NY Fed survey finds
- Consumer prices rise more than expected, pushed by 9.1% jump in gasoline
- The NFIB Small Business Optimism Index rose 2.4 points in March to 98.2.
- Pace of U.S. economic recovery accelerates, Fed says
- U.S. Home-Builder Confidence Increases Slightly in April — NAHB
- U.S. retail sales post largest gain in 10 months; weekly jobless claims fall
- Fed’s Daly says not time for taper, still far from goals
- U.S. Consumer Sentiment Extends Gains to Early April — University of Michigan
GBP Pairs
- BoE’s Tenreyro says removing policy support too early could be costly
- UK retail sales rise but most categories decline – BRC
- UK economy returns to growth despite Covid restrictions
EUR Pairs
- ECB’s Panetta says Euro area may have lost two years of growth
- German investor morale falls in April on lockdown fears, ZEW says
- ECB’s Lagarde says euro zone economy still on crutches
CHF Pairs
There were no catalysts or headlines from Switzerland, and given that broad risk sentiment leaned positive this week, it’s no surprise the Swiss franc was a net loser through out most of the week, especially against the comdolls.
CAD Pairs
- Business sentiment jumps to third-highest ever in Canada
- Canadian manufacturing sales fell 1.6% to $55.4 billion in February
- Canadian jobs surge in March by +634K – ADP
- Canada’s wholesale sales fell 0.7 per cent in February
NZD Pairs
- RBNZ kept interest rates on hold at 0.25% as expected
- New Zealand food prices rise 0.5% on year in March
- NZ House prices defy new LVR rules to hit fresh records in March
AUD Pairs
- Australian business conditions surge to record in March
- Australia’s Westpac consumer confidence index up by 6.2% in April
- Australia’s jobs growth tops forecasts in March, unemployment drops to 1-year low
JPY Pairs
- Japanese producer prices tick higher for the first time in 13 months
- Japan’s preliminary machine tool orders rise by 65% y/y in March
- Japan’s slow vaccine rollout pushes back recovery timeframe
- Japanese core machinery orders slumped by 8.5% vs. expected 2.4% gain
- Bank of Japan’s Kuroda warns of lingering COVID-19 pain for economy
- Japanese manufacturers’ sentiment brightens in April – Reuters Tankan
