Dollar Trades Mixed ahead of Fed Speech

Dollar Trades Mixed ahead of Fed Speech

The US dollar was mixed against its major trading partners early Tuesday ahead of a busy day of appearances by Federal Reserve officials before the release of April consumer inflation data on Wednesday.

After a 50-basis point rate hike by the Federal Reserve and a mixed April employment report last week, markets will be looking for any clues to the direction Fed officials may take at the June 14-15 meeting.

Most analysts expect another 50-basis point rate increase at that meeting, but there are fears that a larger 75 basis point increase may be needed at some point to ramp up inflation fighting.

Tuesday’s speech schedule includes New York Fed President John Williams, Fed Governor Christopher Waller, and Cleveland Fed President Lorretta Mester, all voters on the FOMC this year.

Also on the schedule are Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin and Minneapolis President Neel Kashkari, who participate in FOMC discussions but do not vote in 2022.

The relatively light data schedule includes the weekly Redbook retail sales report and the Investors’ Business Daily consumer sentiment reading, the first for May. READ: UK’s FCA Launches Digital Campaign Against Cryptocurrency

The National Federation of Independent Businesses reported earlier Tuesday that small business sentiment was unchanged in March below the historical average due to continued concerns about inflation and a shortage of skilled labour.

A quick summary of foreign exchange activity heading into Tuesday shows that GBP-USD rose to 1.2355 from 1.233 at the Monday US close and 1.2347 at the same point Monday morning.

UK retail sales fell unexpectedly in April after a smaller decline in March, data released overnight showed. There are no Bank of England speakers scheduled for Tuesday. The BOE’s next meeting is scheduled for June 16. EUR-USD fell to 1.0549 from 1.0559 at the Monday US close and was virtually unchanged from 1.0548 at the same point Monday morning.

The EU ZEW economic index rebounded back above the breakeven point in May after two months of negative readings, according to data released earlier Tuesday. European Central Bank member Luis de Guindos speaks today as the ECB is expected to hold rates steady at its meeting on June 9.

USD-JPY fell to 130.0234 from 130.3276 at the Monday US close and is well below the 131.1489 level at the same point Monday morning. Japanese household spending rose solidly in March as COVID-19 restrictions were reduced but spending for the full quarter was still weak. The Bank of Japan, unlike other major economies, suggests that more accommodation is needed to spur growth.

USD-CAD slipped modestly to 1.3005 from 1.3014 at the Monday US close but is up from 1.2946 at the same point Monday morning.  There are no Canadian data scheduled for release on Tuesday.

The Bank of Canada next meets on June 1, when another 50-bp rate increase is expected, and a 75-bp hike is being priced in by some analysts. #Dollar Trades Mixed ahead of Fed Speech