Dollar Gains v. Safe Havens; Drops v. Aussie, Sterling, and Euro
FEBRUARY 25, 2021
The U.S. Dollar was pulled in opposite directions overnight, gaining against the safe-haven currencies but continuing to get pummeled by commodity-backed currencies.
The British pound pushed higher for a sixth straight day.
Global stocks are back in rally mode even as the selloff in global bonds depends. Domestically, Treasury yields hit a fresh one-year high but the debt among developed economies also came under pressure. The so-called “reflation trade” is apparent among multiple asset classes as investors are betting on a rosier outlook for the global economy. More solid vaccine developments and the likelihood of the passage of President Biden’s stimulus package have added to the buoyant mood.
This morning’s economic data could dent the “risk-on” sentiment, however. Weekly jobless claims are expected to show that 800K new jobless claims were made last week. The labor market continues to suffer historic weakness and Fed chair Jerome Powell made it a point to explain how far the country is from “full employment” during his testimony to Congress earlier this week.
Durable goods orders and the second reading of fourth-quarter gross domestic product are due out at 8:30 a.m. Pending home sales are out at 10 a.m.
What to Watch Today…
- Jobless claims, 4th Q GDP and Durable Goods at 8:30 a.m.
The Euro jumped half a percent against the U.S. dollar and reached its strongest level since January 8th. There was not much in the way of economic data that can be credited with the move, however. German consumer confidence came in slightly less disappointing than expected with a print of -12.9. French consumer confidence was also lackluster.
European Central Bank chief economist Philip Lane this morning mentioned that policymakers are keeping a keen eye on the rise in bond yields and noted it could damage the Euro-zone’s recovery. Indeed, the reflation trade is not limited to American shores.
The Australian and New Zealand dollars were the biggest gainers overnight, with the Aussie reaching its strongest level since 2018. A spectacular rise in some metals has lifted the antipodean pair. Copper is now within striking distance of a record high set 10 years ago and aluminum reached a two-year best.