U.S. Dollar Recovers As Risk Shifts Negative

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U.S. Dollar Recovers As Risk Shifts Negative

OCTOBER 29, 2021

After taking it on the chin yesterday, the U.S. dollar is in modest recovery mode this morning. 

Overview

The risk-off sentiment was kicked off by disappointing earnings results in Europe. The mood has seeped into U.S. markets with contracts on the S&P 500 and Nasdaq in the red.  Regardless, European stocks have gained for four straight weeks and American indexes are near record highs.

President Biden outlined the framework for his economic agenda yesterday before traveling to Europe for a G20 meeting and U.N. summit.  Congress is not in session today, but negotiations are expected to continue today and throughout the weekend.

We will get a fresh look at inflation later this morning.  The PCE Deflator, the Federal Reserve’s favorite gauge, will be released at 8:30 a.m.  Chicago PMI and the University of Michigan Consumer sentiment data will be released later this morning.

What to Watch Today…

  • PCE Deflator at 8:30 a.m.

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EUR

The Euro shot higher against the U.S. dollar yesterday, gaining nearly a full percent. The common currency took advantage of disappointing growth figures in the U.S. and comments from ECB President Christine Lagarde yesterday.  While maintaining that the central bank is in no hurry to raise interest rates, she stopped short of saying that investors’ bets on a hike are wrong.  The market took this as a hawkish signal and caused the euro to rally.

The Euro is falling from its highs of yesterday in early trading, but the common currency is on track for its third weekly gain versus the greenback.  If the Euro’s weekly gain holds, it will be the first three-week rally since April.

CAD

The Canadian dollar is steady against the U.S. Dollar this morning.  After gaining sharply on Wednesday morning, the Canadian dollar seems to be settling into a new, stronger range against the greenback.  The loonie’s strength comes even as the price of oil has retreated in recent days.

Canadian GDP for August is due out at 8:30 a.m., the same time as U.S. inflation data so the USD/CAD cross is likely to experience some volatility this morning and may test the loonie’s new ranges.

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