Dollar Falls Ahead of U.S. President Joe Biden Address
The US dollar was only modestly lower against its major trading partners early Tuesday, apart from a small gain against the yen, as markets await a deluge of US data Wednesday and Thursday before the Friday holiday.
US President Joseph Biden will address the nation a Tuesday to detail further efforts to combat the rise of COVID-19 cases, though the White House has suggested that lockdown measures are not being considered at this point.
The relatively light data schedule Tuesday includes the current account deficit for Q3, the Philadelphia Fed’s non-manufacturing index for December and weekly Redbook retail sales.
Looking ahead, gross domestic product growth, consumer confidence and existing home sales reports will be released Wednesday and personal income and spending, initial jobless claims and new home sales releases are scheduled for Thursday as data providers pack in their releases before Friday’s holiday and the usual lull between Christmas and New Year’s Day next week.
A quick summary of foreign exchange action heading into Tuesday shows that EUR-USD rose modestly to 1.1289 from 1.1277 at the Monday US close and 1.1269 a day ago, still recovering from a loss at the end of last week.
The European Central Bank is taking a more patient approach to monetary policy tightening than its central bank counterparts, likely holding rates steady until 2023, due to the spread of COVID, particularly the omicron variant. The EU consumer confidence measure will be released Tuesday.
GBP-USD rose to 1.3244 from 1.321 at the Monday US close and 1.3205 at the same point a day ago. UK retail sales growth slowed in December due to the rise of the omicron variant, based on data released earlier Tuesday.
Analysts expect a further sales slowdown in January, as a series of days with record new COVID cases and political drama around the prime minister’s office will continue to weigh on sentiment.
USD-JPY rose to 113.7133 from 113.632 at the Monday US close, rebounding from 113.6384 a day ago, but still below the 114.1654 peaks last week after the Federal Open Market Committee announcement.
The yield differential between the US and Japan will continue to support the dollar, particularly after the FOMC moves through its accelerated tightening and begins to consider interest rate increases.
USD-CAD slipped modestly to 1.2924 from 1.2945 at the Monday US close but was slightly above 1.2919 a day ago. Both the Fed and the Bank of Canada are on track for rate increased in 2022, with the BoC likely to win the race, a positive for the Canadian dollar and a negative for the pair.
Currently, though, the US dollar is getting the better of the trade. Canadian retail sales and housing prices will be released at 8:30 a.m # Dollar Falls Ahead of U.S. President Joe Biden Address
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