Calmer markets to start week, stocks higher, dollar lower

Calmer markets to start week, stocks higher, dollar lower

Last week was painful for markets following the Fed’s surprise hawkish stance. Investors speculated that the Fed might ruin the risk-on, reflation trade narrative, well-entrenched since November. Last night, Asian stocks were hit hard, the Japanese Nikkei down 4% at one point, but European stocks showed resilience and edged higher, which helped fuel the positive opening in US stocks this morning. US 30-year Treasury yields dropped briefly below 2.00% last night, but are currently at 2.05%. The dollar is broadly lower, as traders are being squeezed out of long-held short dollar positions.

Economic Data:

Monday: US Chicago National Activity Index

Tuesday: US Existing Home Sales, Japan PMI

Wednesday: US Current Account Balance, Manufacturing  PMI, New Home Sales, Canada Retail Sales, Eurozone Manufacturing PMI

Thursday: US Durable Goods Orders, Q1 GDP final revision, Bank of England monetary policy decision

Friday: US Personal Income, Personal Spending, PCE Deflator

  • FX Rates
    June 21, 2021

    Rates are not real time. Rates are today's indicative mid-market rates as of time of publishing, which may vary. Please contact SVB for a current quote.

  • USD

    Following the Fed’s surprise hawkish statements last Wednesday, the dollar did an about-face from its two-month old bearish trend, and showed its strongest weekly performance since March 2020. The reflation trade narrative, well-entrenched since last November, is being put to the test. This week, several Fed officials will speak, and might talk back the hawkish tilt to calm markets.

    After an initial sell-off in the pound in Asian trading, which took the GBP/USD briefly below $1.38, there has been a healthy rally near $1.39 amid the broadly weaker dollar. Traders await the Bank of England meeting on Thursday – no change is expected to its 0.10% benchmark rate.

    The euro is slightly higher from Friday’s close on the back of broad dollar weakness. The euro fell 2% following the Fed’s hawkish comments last Wednesday, and has reached the $1.18-$1.19 range, identified by market technicians as a strong support area. Traders await Eurozone PMI data for June to be released on Wednesday.


    The Canadian dollar gained over 0.50% since Friday on the back of a broadly weaker US dollar, and as oil and stocks are firmer this morning. Traders are also focused on the potential negative impact on the decision of Canada’s government to extend a ban on nonessential travel until July 21.


    The Japanese yen moved little over the weekend despite the broad bearish move on the dollar. Traders await a full week of Japanese economic data.

    The Chinese yuan fell slightly, but the decline was in line with the broad sell-off in emerging markets currencies following the Fed’s hawkish tilt. Traders were seen unwinding emerging market assets as the risk-on reflation trade narrative gets tested.

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Scott Petruska
Scott Petruska

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