A rally in Treasuries and bond prices elsewhere is soothing nerves in financial markets, leading to a modest risk-on mood. At least temporarily, investors are upbeat in their assessment of economic growth potential amid the Ukraine war. Also, some money managers are predicting that inflation is near peaking and that rate-hike expectations are overdone. The dollar is lower across the board, the dollar index seeing its biggest daily decline since late March. The USD/JPY rose another 1% this morning, reaching ¥129.40 before dropping briefly below ¥128. Oil and gold prices are steady.
April 20, 2022
EUR/USD 1.0844 GBP/USD 1.3054 USD/CAD 1.2518 AUD/USD 0.7424 USD/JPY 138.65 USD/CNH 6.4502 USD/ILS 3.2209 USD/MXN 20.0385 USD/CHF 0.9472 USD/INR 76.2075 USD/BRL 4.6558 USD/SGD 1.3645 USD/DKK 6.8581 USD/SEK 9.4510 USD/NOK 8.8215
The dollar index has dropped today by nearly 0.50%, the most since late March, as demand wanes for the safe haven currency. A rally in USD Treasuries also helped drive the dollar lower – UST 10Yr yields at 2.88%, are down from yesterday’s high of 2.977%.GBPAfter repeated attempts at driving the pound below $1.30 level, traders have given up, at least for the time being, as it now trades near $1.3050. An IMF report released yesterday stated that over the next two years the UK faces the worst inflation of all the major economies. The IMF predicted that the UK economy will contract by about 1% in both 2022 and 2023. There were no UK economic stats released today.EUR
The euro moved back above $1.08 after touching $1.0760 twice earlier in the week. The second round of French presidential elections will be held on Sunday. Polls suggest that President Emmanuel Macron will win against nationalist rival Marine Le Pen, which should be mildly bullish for the euro, at least for the short-term. Eurozone Industrial Production for February was slightly better than expected, but its trade balance was much worse than January’s figure.CAD
The Canadian dollar outperformed most currencies last night, as US Treasury yields fell, and did so faster than Canadian government bond yields. Canadian inflation data for March showed it rising at a 6.7% pace, faster than expectations of 6.1% and February’s 5.7%. This will pressure the Bank of Canada to be more aggressive in tightening monetary policy.ASIA/PACIFIC
The Japanese yen traded to a fresh 20-year low (dollar high), the USD/JPY reaching ¥129.40 before profit-taking drove it lower, briefly below ¥128. Yen weakness is almost exclusively based on rising US interest rates and a hawkish Fed versus steady Japanese rates and a dovish Bank of Japan. There were no economic releases for Japan today, but inflation data will released tomorrow.
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