Dollar Holds Yesterday’s Gains
MAY 20, 2021
After gaining for the first time in five days yesterday, the dollar settled into ranges overnight.
The greenback opened in the green yesterday as investors focus on inflation fears and emerging Covid cases in Asia which caused equities to tumble and safe havens to gain.
The dollar’s gains accelerated in the afternoon following the release of the Federal Reserve’s minutes from their latest meeting. At the meeting, some policymakers indicated they were open to a debate on scaling back bond purchases at “upcoming meetings.” The “taper talk” surprised markets. Equities immediately tumbled further to the benefit of the greenback. The Fed is acknowledging that the U.S. economy is strengthening, and the central bank may find the scope to start removing monetary stimulus later in the year. While the policy is unlikely to change in the near future, this is likely the Fed’s beginning attempt to telegraph their moves six months out.
We will get more tests to how well the recovery is doing this morning. Weekly jobless claims are expected to show a dip to 450K last week. Continuing jobless claims are also expected to improve. A separate report will show the latest Philadelphia Fed Business Outlook.
What to Watch Today…
- Weekly Jobless Claims at 8:30 a.m.
While the Euro traded to multi-month highs earlier this week, the Euro is still under pressure after losing half a percent during yesterday’s session. The Euro is 4% stronger from its YTD low in late March, but the common currency’s run seems to be losing momentum.
Eurozone finance ministers and central bank chiefs are at an informal meeting today. IMF Managing Director Kristalina Georgieva and ECB President Christine Lagarde will speak at the Vienna Economic Dialogue later this morning.
The Australian dollar experienced heightened volatility overnight. The Aussie gained as the price of some commodities, especially copper, buoyed the currency. Then the Aussie experienced a quick sell-off following unimpressive jobs data. Australian employers cut 30,600 jobs in April, mostly due to a reduction in part-time work. The Aussie has since regained its footing and is advancing against its American counterpart. AUD/USD is 0.3% stronger from yesterday’s close.