With price pressures still running at a subdued level throughout the developed world, hotter-than-expected inflation readings have been hard to come by of late. Perhaps today’s Canadian inflation data marks a turning point for that trend.
The Dollar Index retreated from its 2018 peak of 96.98 following news that China will resume trade talks with the United States later this month. The news allowed the Yuan and other emerging market currencies to rally after a steep selloff led by the Turkish crisis and ongoing trade tensions.
A word of caution to anyone who thinks trading is a passive exercise. Yes, Facebook got taken to the woodshed right there in the 618th day of the rally. The stock has not recovered and with a screaming headline at Drudge this morning, it appears they aren’t learning their lesson. They will continue to invite regulators. But that’s a stock market story for a different day down the road.
The dollar has remained bid against most currencies post-Friday’s U.S. jobs report. The greenback rose on Friday in reaction to the mixed-bag nonfarm payrolls report which showed a weaker-than-expected headline number, but that was offset by positive revisions to the previous reports and a decent but expected rise in average hourly earnings figure.
Uncertainty is usually bad. But with regards to the resignation of David Davis, market participants think it may actually be a good thing as far as the pound is concerned. The Brexit secretary resigned after the UK Prime Minister Theresa May forced through a new “soft Brexit” strategy she intends to present to the cabinet at Chequers.
Markets have calmed down since yesterday’s big risk asset selloff, but that doesn’t mean that there’s nothing exciting on the horizon for traders. Namely, tomorrow’s Bank of England meeting should provide some important insights into Mark Carney and company see policy unfolding moving forward.
The outlook for sterling remains tilted to the downside, especially when factoring in how Brexit-related uncertainty and political risk may force the Bank of England to delay monetary policy normalization this summer.
The pound has started the new week how it ended the last one: lower. It fell below the $1.34 handle for the first time since December earlier this morning before bouncing back slightly ahead of Brexit talks and publication of UK inflation data later in the week.
The U.S. currency is weaker against all major pairs as US tariffs targeting China were announced. The U.S. dollar was trading higher on Wednesday after the U.S. Federal Reserve hiked interest rates by 25 basis points as anticipated. Fed Chair Jerome Powell was neutral on his first press conference but the economic projections painted a strong U.S. economy.