The Canadian dollar traded quietly overnight then came under pressure in early New York trading. The U.S. dollar opened on a mixed note, but edged higher in early trading due to pre-U.S. Consumer Price Index jitters.
U.S. March Inflation is expected to rise 2.5% y/y, with the ex Food and Energy component rising 1.5%. Analysts suggest the risk is for a better-than-expected result and that is making traders nervous. If they are correct, U.S. Treasury yields may spike toward the 1.75% level, boosting the U.S. dollar and driving equity prices lower. However, on the weekend, Federal Reserve Chair Jerome Powell reiterated that the Fed will not raise interest rates "any time soon."
St Louis Fed President James Bullard said the same thing, but added "When you start to get to 75% vaccinated, 80% vaccinated and CDC (the Centers for Disease Control) starts to give more hopeful messages that we are bringing this under better control and starts relaxing some of their guidelines, then I think the whole economy will gain confidence from that," However, he is not a voting member of the Federal Open Market Committee at this time.
Bitcoin provided some distraction for traders with prices setting a new record high of $63,191.37 just before New York opened. The rally is partially due to anticipation of the Coinbase listing on the NASDAQ.
EUR/USD continues to dance with the 200-day moving average at $1.1897. The single currency drifted from $1.1915 to $1.1884, weighed down by caution ahead of the U.S. inflation data and weaker than expected Eurozone ZEW economic sentiment for Germany and the eurozone.
The German government is expected to announce a series of new COVID-10 rules. EURUSD technicals are bullish above $1.1770.
GBP/USD climbed from $1.3744 to $1.3768 in Asia and Europe, then dropped to $1.3727 in New York trading. February Gross Domestic Product rose 0.4% compared to the 2.2% drop in January. Despite the increase, U.K. growth is well below February 2020 levels. GBP/USD technicals are bullish above $1.3670.
USD/JPY rallied from 109.38 to 109.74 in Asia the erased the move in Europe, dropping to 109.24 just before New York opened. Traders are adjusting positions into the U.S. inflation data release.
AUD/USD and NZD/USD are close to unchanged to start the NY session. Australia Business Confidence data came in below the previous month’s upwardly revised result. NZD/USD is modestly bid ahead of tomorrow’s Reserve Bank of New Zealand monetary policy meeting. The central bank is expected to leave rates unchanged.
Rahim Madhavji is the President of KnightsbridgeFX.com, a Canadian currency exchange that provides better rates than the banks to Canadians
