US Dollar Climbs Amidst Tariffs Threats, Consumer Price Expectation
The US dollar rose against its major trading partners early Monday before a busy week that includes testimony from Federal Reserve Chairman Jerome Powell and consumer price data and retail sales data for January later in the week.
Amidst expectations, U.S consumer price data and the Treasury’s budget statement are due Wednesday, as well as the second day of testimony from Powell, this time before the House Financial Services Committee.
Producer price data and weekly jobless claims are scheduled to be released Thursday. A quick summary of foreign exchange activity heading showed that USDEUR fell to 1.0313 from 1.0331 at the Friday US close and 1.0371 at the same time Friday morning.
Eurozone investor confidence improved more than expected in February but still indicated more pessimism than optimism. Since President Donald Trump’s election, global rates seem less correlated to US rates, also helping the euro swap curve move more independently, ING said in a note.
Trump’s tariff threats, for instance, are seen as inflationary for the US while potentially deflationary for the targeted country, triggering opposite rate reactions. In the Eurozone, analysts already saw a strong repricing for more European Central Bank cuts when Trump initially threatened with tariffs against Canada, Mexico, and China, – whilst the impact was on the hawkish side for the Fed.
The latest reaction to Trump’s steel tariffs had almost no notable impact on euro rates. “When looking at the entire period since Trump’s election, the correlation between daily changes of the 2Y euro swap rates and 2Y US Treasury yields actually fell to zero.”.
With euro rates less tied to US dynamics, the spread differential with US Treasury yields could widen further, according to ING. GBPUSD fell to 1.2383 from 1.2411 at the Friday US close and 1.2447 at same time Friday morning. There are no UK data on Monday’s schedule. The next Bank of England meeting is scheduled for March 20.
USDJPY rose to 152.2301 from 151.3042 at Friday US close and 152.1442 at the same time Friday morning.
Japanese service workers sentiment declined unexpectedly in January, according to data release overnight, while the Japanese current account surplus narrowed in December. The next Bank of Japan meeting is scheduled for March 18-19.
USDCAD rose to 1.4342 from 1.4286 at the Friday US close, but was down slightly from a level of 1.4344 at the same time Friday morning. There are no Canadian data on Monday’s schedule. The next Bank of Canada meeting is scheduled for March 12. Dangote Cement Price Slump Presents 69% Upside Potential – Analysts
