Morning Minutes

US Dollar Backslides Ahead of Tomorrow’s Inflation Report




The US Dollar has dropped back to start the new trading week, taking some of the pressure off of other currencies and commodities. The Euro is up 1.0% and trading a full penny above par, while the Pound is up 1.0%, the Canadian Dollar is up 0.25%, and gold is up 0.8%. In commodity action, copper is up 0.8%, WTI crude oil is up 1.0% and natural gas is down 1.3%.

Some of the US dollar weakness may be related to other central banks stepping up their inflation fight, particularly after some ECB officials made hawkish comments about continuing rate hikes over the weekend. The Bank of England was scheduled to meet this week but that was postponed following the passing of Queen Elizabeth II.

Investors may also be positioning ahead of tomorrow’s US consumer price report where the headline number is widely expected to decline to 8.1% from 8.5% last month, while the street consensus is calling for an increase to core inflation to 6.0% from 5.9%. Despite recent comments from Fed officials about staying the course on inflation, some investors may look to tomorrow’s consumer price report and Wednesday’s US producer price report for indications of whether inflation has slowed enough to enable the Fed to slow its monetary tightening program in the foreseeable future. The other major economic announcements of note are US and Chinese retail sales on Thursday. It is also a light week for earnings reports.

The start of the new trading week finds markets around the world in the green across the board. In Asia Pacific trading the Hang Seng soared 2.7% while the Nikkei climbed 1.1%. In Europe today, the Dax is up 1.6% and the FTSE is up 1.3%. US index futures are up 0.1%-0.4% adding to last week’s rebound gains.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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