Oil Climbs; Sterling Falls From Three-Year High
JUNE 01, 2021
The U.S. dollar is mixed this morning as American traders return from the long Memorial Day weekend.
The Bloomberg Dollar Spot Index is flat but there is plenty of movement on individual pairs, especially the pound sterling and commodity-based currencies. GBP/USD is down 0.4% after rallying to multi-year highs yesterday.
Perhaps this morning’s economic data will force the U.S. dollar out of range. Markit Manufacturing PMI for May is due out at 9:45 a.m. Followed by construction spending, May ISM manufacturing, and Dallas Fed manufacturing activity.
The Fed’s Randal Quarles and Fed Governor Lael Brainard are due to speak later.
What to Watch Today…
- Manufacturing data at 9:45 a.m. and 10 a.m.
EUR/USD was quiet yesterday as both the U.S. and U.K. markets were closed. The pair has been sluggish to start the day even following important inflation data. Euro-area inflation reached 2.0% for the first time since 2018 as the region’s economies start to reopen. The spike, however, was above the median estimate of economists. Germany, Spain, and Italy all reported increases. Much like in the U.S., European policymakers contend that the move higher is only temporary and not cause for concern. Indeed, core inflation which strips out food and energy costs was just 0.9% in May.
EUR/USD remains at the top of the recent range and slightly above our quarterly forecast.
Petro-backed currencies were the biggest winners overnight as the price of oil spiked to its highest level since 2018. OPEC+ alliance forecast a tightening global market. They stated that the stockpiles that were built up during the pandemic will slide rapidly during the second half of 2020. According to Bloomberg, the alliance is expected to ratify a scheduled output increase for July but the increase will be modest.
As a result, West Texas Intermediate rose as much as 3.2% from Friday close and Brent crude topped $70.
The Norwegian krone rallied over a percent versus the U.S. dollar and the Canadian dollar also enjoyed gains.