The US dollar loses ground while markets await Fed Chair testimony and Congressional debate on additional stimulus
Most currencies gained vs. the US dollar especially the British pound which trades at two-year highs. Financial markets try to evaluate the impact of massive stimulus spending by the US to both combat Covid-19 and fulfill spending promises on infrastructure by the Biden administration. Commodity prices continue to strengthen which has helped the Australian dollar and other commodity currencies to new highs.
Economic events/data this week:
Tuesday: House price data for December; Consumer Confidence for February; Fed Chair Powell semi-annual Congressional testimony
Wednesday: New Home Sales for January; Day Two of Fed Chair Powell testimony
Thursday: Durable Goods Orders for January; Weekly Initial Jobless Claims
Friday: PCE inflation data for January; Univ. of Michigan Consumer Confidence for February
February 22, 2021
EUR/USD 1.2145 GBP/USD 1.4035 USD/CAD 1.2638 AUD/USD 0.7891 USD/JPY 105.38 USD/CNH 6.4745 USD/ILS 3,2675 USD/MXN 20.8040 USD/CHF 0.8967 USD/INR 72.5010 USD/BRL 5.5235 USD/SGD 1.3235 USD/DKK 6.1265 USD/SEK 8.2750 USD/NOK 8.4950
The dollar seems to be resuming its downward trend as risk-on trading pushed a number of currencies to their strongest levels since April 2018. Positive sentiment around increased vaccinations and more stimulus spending led investors to sell safe-haven dollars and US Treasury securities.GBP
The British pound remained above the psychologically important $1.40 level, helped by optimism the UK government is determined to contain Covid-19 and continue an aggressive vaccination effort. The pound seems poised to push toward pre-Brexit levels of $1.50.EUR
The euro is slightly stronger on overall dollar weakness. Covid concerns and a slower roll-out of vaccines on the continent has held back expectations of a strong economic bounce-back in the eurozone.CAD
The Canadian dollar is flat after hitting its strongest level vs. the US dollar since April 2018. The price of oil is at a one-year high after oil production was severely disrupted in the US during last week’s historic low temperatures in Texas.ASIA/PACIFIC
The Chinese yuan is slightly weaker as the Lunar New Year holidays come to an end.
The Australian dollar follows commodity prices higher on expectations the global economy will surge as vaccine distribution widens this spring. There are also expectations the Australian central bank may consider raising interest rates.
The New Zealand dollar hit two-year highs after S&P raised the nation's credit rating to AA+ and copper prices rallied.
For more analysis on FX markets or information regarding SVB's FX services:
See all of SVB's latest FX information and commentary at www.svb.com/trends-insights/foreign-exchange-advisory
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