US Open Note – Safe havens give ground to commodity currencies; core PCE inflation index awaited
March 26, 2021 1:28 pm
en the worst performer, antipodeans on the rise
Friday has been a risk-on day ahead of the US open, with safe-haven currencies falling and stocks rising as Biden’s doubling of the vaccination rollout target and the Fed’s decision to lift restrictions on dividends and buybacks for most banks on June 30 brightened the outlook for the global economy.
The European stock indices followed their Asian counterparts higher, though their ascent was less cheerful, driven mainly by energy and basic materials. Mini futures tracking the Dow Jones were moderately up, whereas those for S&P 500 and Nasdaq 100 were down by an equivalent percentage, pointing to a mixed open on Wall Street.
In FX markets, the Japanese yen was the weakest currency, with the Australian and New Zealand dollars stealing most the gains although news that China will impose anti-dumping duties on Australian wine on March 28 reminded markets that tensions with China remain inflamed. Technically, however, the daily chart for dollar/yen seems more exciting as the pair has strongly defended its upward pattern by accelerating to a new nine-month high of 109.79 today.
Dollar holds firm; core PCE inflation index to stabilize in March
Before we head for the weekend, the Fed’s preferred inflation measure, the core PCE index, could challenge the greenback at 13:30 GMT. The price index, which excludes volatile items such as food and energy, is expected to stabilize at 1.5% y/y in March, while more notably, the personal consumption and income figures released at the same time are projected to pull forcefully into the negative area, justifying Powell’s persisting view that any upside inflationary pressures this year will only be temporary. Still, the elevated 10-year Treasury yield suggests that some investors do not buy the scenario of transitory inflation and perhaps today’s data could provide more evidence on that. Yesterday, demand for the much-awaited 7-year Treasury bond auction was weak but stronger than the previous one.
Obviously, the improving economic background and the progressing vaccine distribution in the US is adding support to the dollar as long as Europe is struggling to catch up because of its troubling vaccine delivery. The risk-on sentiment helped the euro and the pound to grab some buying interest today, though the gains were limited to push the dollar index to the negative zone.
The downside risks in euro/dollar strengthened after the close below the 200-day simple moving average. A break below the 1.1760 – 1.1700 area could trigger the next selling wave. Likewise, pound/dollar dropped to the bearish area following the downfall below the supportive 50-day SMA. A step below 1.3640 may confirm additional losses.
en the worst performer, antipodeans on the rise
Friday has been a risk-on day ahead of the US open, with safe-haven currencies falling and stocks rising as Biden’s doubling of the vaccination rollout target and the Fed’s decision to lift restrictions on dividends and buybacks for most banks on June 30 brightened the outlook for the global economy.
The European stock indices followed their Asian counterparts higher, though their ascent was less cheerful, driven mainly by energy and basic materials. Mini futures tracking the Dow Jones were moderately up, whereas those for S&P 500 and Nasdaq 100 were down by an equivalent percentage, pointing to a mixed open on Wall Street.
In FX markets, the Japanese yen was the weakest currency, with the Australian and New Zealand dollars stealing most the gains although news that China will impose anti-dumping duties on Australian wine on March 28 reminded markets that tensions with China remain inflamed. Technically, however, the daily chart for dollar/yen seems more exciting as the pair has strongly defended its upward pattern by accelerating to a new nine-month high of 109.79 today.
Dollar holds firm; core PCE inflation index to stabilize in March
Before we head for the weekend, the Fed’s preferred inflation measure, the core PCE index, could challenge the greenback at 13:30 GMT. The price index, which excludes volatile items such as food and energy, is expected to stabilize at 1.5% y/y in March, while more notably, the personal consumption and income figures released at the same time are projected to pull forcefully into the negative area, justifying Powell’s persisting view that any upside inflationary pressures this year will only be temporary. Still, the elevated 10-year Treasury yield suggests that some investors do not buy the scenario of transitory inflation and perhaps today’s data could provide more evidence on that. Yesterday, demand for the much-awaited 7-year Treasury bond auction was weak but stronger than the previous one.
Obviously, the improving economic background and the progressing vaccine distribution in the US is adding support to the dollar as long as Europe is struggling to catch up because of its troubling vaccine delivery. The risk-on sentiment helped the euro and the pound to grab some buying interest today, though the gains were limited to push the dollar index to the negative zone.
The downside risks in euro/dollar strengthened after the close below the 200-day simple moving average. A break below the 1.1760 – 1.1700 area could trigger the next selling wave. Likewise, pound/dollar dropped to the bearish area following the downfall below the supportive 50-day SMA. A step below 1.3640 may confirm additional losses.
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