Risk-on hits dollar as Fed says recovery on track and inflation risks are transitory

The dollar is weaker relative to most currencies as the Fed signaled interest rates will remain close to zero for quite some time. The Fed also said quantitative easing in the form of the Fed buying Treasuries and mortgage backed securities will continue. These ultra-loose monetary policy measures lead investors to believe asset prices will continue upward and the global economy will recover - thereby weakening the dollar.

"Risk more than others think is safe. Dream more than others think is practical."

Howard Schultz
  • FX Rates
    April 29, 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 continues to weaken and is now down 2.3% in April. Q1 GDP came in at 6.4% which is lower than the 6.7% expected. Also, Core PCE came in at 2.3% which was a touch lower than the 2.4% expected. The Fed is focused on job creation saying a “string” of solid monthly job gains will be required before monetary policy becomes less accommodative. Weekly jobless claims were 553K which was higher than expected and much higher than the 220K average just before Covid.

    GBP

    The pound gained versus the USD during yesterday’s session and into this morning. GBP/USD trades up 0.62% so far this week as the USD moves lower following the Fed’s dovish comments. Financial markets largely ignored the investigation around Boris Johnson’s apartment renovations and where the money came from.

    EUR

    The euro gained on dollar weakness and a German CPI data reading for April which came in at 2.1% which was better than the 2.0% forecast. The higher inflation reading supports the expectation of a recovering economy and ultimately less monetary accommodation by the ECB - both of which would strengthen the euro.

    CAD

    The Canadian dollar surges as the price of oil increases and investors bet on a strong recovery in Canadian exports – including commodities. The price of oil is higher again today and is up 5 of the last 6 trading sessions for a 7% gain.

    ASIA/PACIFIC

    The Chinese renminbi strengthened on overall dollar weakness and prospects for a strong economy in China. 

    The safe haven Japanese yen weakened on overall optimism for the global recovery and due to the US 10yr Treasury yield surging 6bps to 1.67%.

Contact Us

For more analysis on FX markets or information regarding SVB's FX services:

Contact your respective SVB FX Advisor or the SVB FX Advisory Team at fxadvisors@svb.com.
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory

Subscribe to receive the Daily FX Update in your inbox.

By providing your email address and clicking on the Subscribe button below, you consent to receive emails from Silicon Valley Bank for your chosen categories. You also consent to the terms of our Privacy Notice. If you have privacy questions, you may contact us at PrivacyOffice@svb.com. You can withdraw your consent at any time.

Peter Compton
WRITTEN BY
Peter Compton

Insights from SVB Industry Experts

 
SVB experts provide our customers with industry insights, proprietary research and insightful content. Check out these related articles that may be of interest to you.

Dollar remains weaker following non-farm payroll disappointment

 

Daily FX Update: Dollar sinks following weak employment data

 

Jobless claims better than expected, dollar slightly weaker

 

Daily FX Update: Dollar mixed versus peers ahead of key data this week

 

Daily FX Update: Dollar demand strong ahead of data

 

Daily FX Update: Weak demand for USD amid upbeat market mood