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.
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April 29, 2021
EUR/USD 1.2105 GBP/USD 1.3949 USD/CAD 1.2308 AUD/USD 0.7771 USD/JPY 109.22 USD/CNH 6.4741 USD/ILS 3.2464 USD/MXN 20.1545 USD/CHF 0.9108 USD/INR 74.04 USD/BRL 5.3727 USD/SGD 1.3269 USD/DKK 6.1414 USD/SEK 8.3684 USD/NOK 8.1975
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%.
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