The US Dollar is in rally mode this morning, putting a headwind in front of other currencies, commodities and equities. The US Dollar is up 2.0% against Gold and the Pound, up 1.3% against the Australian Dollar, up 0.6% against the Canadian Dollar and up 0.3% against the Euro. US Dollar prices for commodities are falling today with WTI Crude Oil down 1.1% and Copper down 1.5%. US index futures are also in the red today with the three main contracts down 0.4%-0.5%.
The US Dollar appears to be getting a boost from a climb in the 10-year US treasury note yield toward 3.75% recently. It appears that investors may be thinking either that US interest rates may continue to rise or remain at higher levels for longer than previously thought. Yesterday’s higher than expected US consumer price inflation report may be part of this. More likely, however, this sudden hawkish change in thinking may be related to the departure of Fed Vice Chair Lael Brainard for a position at the White House. During her tenure at the Fed, Dr. Brainard had been the leader of the dovish camp and she had been widely seen as a counterbalance to the relatively more hawkish tendencies of Fed Chair Powell.
Meanwhile, today’s strong US economic news may also give the Fed scope to remain hawkish for longer. US retail sales (3.0% vs street 1.8% and previous -1.1%), and the Empire State Manufacturing Survey (-5.8 vs street -18.0 and previous -32.9) both came in significantly stronger than expected. In Canada, Manufacturing Sales (-1.5% vs street -1.8%), and Wholesale Sales (-0.8 vs street -1.7%) both beat expectations but Housing Starts (215k vs street 240K) were disappointing. US Industrial Production (street 0.5%) is due at 9:15 am today.
In earnings news, AirBNB posted stronger that expected earnings ($0.48 vs street $0.26), and the shares are up 7.9% in premarket trading. Suncor Energy ($1.81 vs street $1.80), Barrick Gold ($0.13 vs street $0.11), and Kraft Heinz ($0.85 vs street $0.78) also beat expectations. After the close today, Shopify, Cisco Systems, Manulife Financial, and Nutrien are scheduled to report results.