Dollar Gains Versus Yen; Sterling Continues Rally

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Dollar Gains Versus Yen; Sterling Continues Rally

FEBRUARY 24, 2021

While volatility is elevated in most asset classes, the U.S. Dollar remained subdued. 

Overview

The Bloomberg Dollar Index is down 0.1% to start the day.  The dollar only saw modest changes yesterday despite large swings in risk sentiment.  Equities opened in a huge hole but regained much of those losses throughout the day after Fed Chairman Jerome Powell looked to calm investors.  Powell held a positive outlook for the economy and tamped down fears of rampant inflation.  Expect Powell to hold a similar sentiment when he gives testimony in front of the House Financial Services panel late this morning.

The greenback is enjoying small gains versus traditional safe-haven currencies such as the Japanese yen and the Swiss Franc as risk sentiment is steady this morning.

Powell will once again dominate trading today but there are some fundamental data due out that is worth keeping an eye on.  January new home sales are expected at 10 a.m. and U.S. crude inventories are due out at 10:30 a.m.  The Fed’s Lael Brainard and Richard Clarida will also speak later today and will likely hold a similar tone to the Fed Chief.


What to Watch Today…

  • New Home Sales at 10 a.m.

View Economic Calendar

CAD  

A rally in commodity prices continues to benefit commodity-backed currencies.  The Canadian dollar extended its recent rise against the greenback and is currently at its strongest level since April 2018.  The price of West Texas Intermediate oil climbed 1%.  Bloomberg News points out that some forecasts for oil are now over $100 a barrel as a strong vaccine rollout, continued monetary support, and strengthening fundamentals will increase demand for energy.  USD/CAD traders will keep a sharp eye on U.S. crude inventories that will be released at 10:30 a.m.

GBP  

The British pound extended its gains against the dollar for the fifth day and is in the midst of its longest rally since 2015 against the Euro. As we have stated, the sterling continues to benefit from boosted confidence in the vaccine rollout and as Covid restrictions begin to lift.

GBP/USD rallied nearly 1% overnight and reached its highest level since April 2018.  While the sterling gave back some of those gains, the dollar is at the weakest level during an American trading session in three years.

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