Dollar Slides Ahead of Fed Chairman Reconfirmation Hearing
The US dollar is holding lower against its major trading partners early Monday ahead of a light data day, as markets continue to dissect Friday’s mixed employment report. Meanwhile, Federal Reserve Chairman Jerome Powell’s reconfirmation hearing on Tuesday.
Fed’s last minutes’ release signals a fast and furious hawkish poised which some analysts think would heat up interest rates in the frontier and emerging markets.
Wholesale inventories and sales are the only key data release on Monday’s calendar. Nonfarm payrolls growth was softer-than-expected in December, which the markets at once focused on, but a further decline in the unemployment rate and a jump in hourly earnings are likely more important for Federal Reserve decision-making.
Appearances by Fed officials pick up this week, providing opportunities to relay the message that those pockets of strength meet the Fed’s definition of maximum employment.
Highlights for the rest of the week include Federal Reserve Chairman Jerome Powell’s reconfirmation hearing on Tuesday, the Consumer Price Index and the Fed’s Beige Book on Wednesday, the Producer Price Index and Fed Governor Lael Brainard’s confirmation hearing to become Fed Vice Chair on Thursday, and retail sales and industrial production data on Friday.
A quick summary of foreign exchange action heading into Monday shows that USD-CAD fell slightly to 1.2631 from 1.2642 at the Friday US close and well below the 1.2722 level immediately before the strong Canadian payrolls data Friday morning.
Canada’s December jobs reading increased the chances of rate increases by the Bank of Canada in the spring. There are no major data releases from Canada Monday.
USD-JPY fell to 115.2459 from 115.5995 at the Friday US close. The pair was at 115.7829 before the US employment release Friday morning. After a volatile week, the pair sits slightly above the level seen at this point last week. Markets were closed in Japan on Monday.
EUR-USD slipped to 1.1323 from 1.1361 at the Friday US close, losing some of Friday’s gains but remaining above the 1.1297 level just before the US employment release.
Eurozone’s unemployment rate slipped to 7.2% in November from 7.3% in October, as expected, in data released earlier on Monday. For the EU as a whole, the unemployment rate declined to 6.5% in November from 6.7% in October.
The European Central Bank does not meet again until Feb. 3, with plenty of December data scheduled before then to reflect the effects of the new virus variant.
GBP-USD fell slightly to 1.3576 from 1.3591 at the Friday US close but was up solidly from the 1.3546 level before the US employment release on Friday.
There are no key data reports from the UK on Monday, with UK GDP on Friday the highlight of the week. The Bank of England meets next on Feb. 3 and is likely to consider further monetary policy tightening assuming that omicron cases have diminished.
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