Yesterday’s late US dollar sell-off continues as PPI comes in weaker than expected

Yesterday’s late US dollar sell-off continues as PPI comes in weaker than expected

Risk-on sentiment gained throughout yesterday’s trading day causing the dollar to sink. The trend continues this morning as the Producer Price Index for September (+8.6%) showed wholesale prices did not rise as much as expected (+8.7%). Some economists are starting to think of the recent increases in prices as “peak inflation”. Commodity currencies like the Australian and Canadian dollar lead gains.

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  • FX Rates
    October 14, 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
    The dollar index is trading down 0.65% from Tuesday’s highs – US yields moving lower, weighed on USD. Minutes from the Federal Reserve’s September meeting showed that Fed officials broadly agreed that tapering should start mid-November or December meaning bond purchases could cease by mid-2022. Weekly Initial Jobless Claims (293K) were better than expected (320K) indicating last month's weak payroll report may have been more a function of workers quitting existing jobs to find a better one.

    The pound traded higher vs the USD during yesterday’s session and that has continued into this morning with the pair breaking through the 1.37 level. The pair is now, as we print, up 0.85% this week. GBP has reached a 2-week high vs. the US dollar some of which is due to profit-taking from FX speculators who had made bets on a stronger US dollar.

    EUR/USD rallied yesterday and into this morning with the pair trading over 1.16 as profit-taking and weak USD Treasury yields weigh on the greenback.
     The EU and UK are braced for a new round of negotiations over the trade barriers in Northern Ireland. The EU voiced optimism that the two sides will reach an agreement in the coming weeks. Adjustments to the deal include cutting customs checks and sanitary inspections on goods.
    The Canadian dollar is trading at its strongest level since the July 4 holiday. Oil prices continue to move higher as demand is expected to increase. Oil can be seen as a substitute for natural gas - where supplies are constrained.
    The Chinese renminbi traded at its strongest level in four years vs. a basket of currencies. The People’s Bank of China indicated they were concerned and in turn the RMB weakened overnight. 
    The Australian dollar has gained 2.75% this month vs. the US dollar as commodity prices remain elevated as shortages prevail and longer-term economic growth is expected to be robust.
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Peter Compton
Peter Compton

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