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U.S. Dollar Soars As Investors Look To FOMC

By Kathy LienForexJun 11, 2021 04:17PM ET
www.investing.com/analysis/us-dollar-soars-as-investors-look-to-fomc-200585650
U.S. Dollar Soars As Investors Look To FOMC
By Kathy Lien   |  Jun 11, 2021 04:17PM ET
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The U.S. dollar ended the week higher against all of the major currencies with today’s rally, a delayed reaction to Thursday’s inflation report. Stronger-than-expected consumer confidence also helped to boost demand for U.S. dollars ahead of next week’s Federal Reserve monetary policy announcement. U.S. policy-makers have insisted that the increase in inflation is transitory, with disappointing consumer spending and labor market numbers discouraging taper talk next week.
 
However, many central banks in weaker recovery positions have begun the process of policy normalization by reducing asset purchases, so there’s growing belief that it is high time for the Federal Reserve to do so as well. It will be a close call next week because the Fed has consistently downplayed price pressures, but the 5% year-over-year CPI increase is the largest in more than a decade. Excluding food and energy, the increase was the largest in nearly three decades. No other major country is running inflation as hot as the U.S., and the problem is that the high prices for travel, food and autos may not fall as quickly as the Fed anticipates as some of these businesses look to recoup lost income.
 
The rally in the U.S. dollar and rise in Treasury yields tells us that investors expect policy-makers to discuss tapering and make subtle shifts in their language to prepare for that eventuality. With the market divided on which way the Fed will sway, Tuesday’s retail sales report will go a long way in setting expectations for Wednesday’s policy meeting.
 
Speculation about Fed taper talk and the European Central Bank’s decision to avoid the discussion sent EUR/USD tumbling on Friday. With no major Eurozone economic reports on next week’s calendar, the euro will take its cue from the market’s appetite for U.S. dollars. Sterling weakened despite mixed data. Monthly GDP growth and the trade balance were stronger than expected, but industrial production unexpectedly declined. It is now widely believed that the UK’s target for a full reopening will be delayed from June 21 to the end of the month due to rising COVID cases. UK Chancellor Rishi Sunak said he could accept a delay of up to four weeks. As we mentioned in yesterday’s note, a delay would hurt sterling. Next week is a busy one for the UK, with inflation, employment and retail sales reports scheduled for release.
 
The New Zealand and Australian dollars were the worst performers, with NZD falling on the back of disappointing manufacturing data. While the country’s PMI manufacturing index rose from 58.3 to 58.6, this increase barely offset last month’s sharp decline. New Zealand is further along its recovery than the U.S., and the Reserve Bank of New Zealand is less dovish than the Fed, but as a high-beta currency NZD is exceptionally vulnerable to risk appetite and demand for U.S. dollars. New Zealand first quarter GDP numbers are due for release next week. Data in Australia was less impressive, which explains the decline in AUD. Labor market numbers are due from Australia and, after two months of subdued job growth, investors are hoping for a stronger recovery in jobs. USD/CAD rose to its strongest level in three weeks, but a broader recovery hinges on Fed optimism.
U.S. Dollar Soars As Investors Look To FOMC
 

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U.S. Dollar Soars As Investors Look To FOMC

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Comments (25)
ruby lin wan yi
ruby lin wan yi Jun 13, 2021 10:01AM ET
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how about Monday morning ? gold will going up again ? to 1889
Steve Grossman
Steve Grossman Jun 12, 2021 3:32PM ET
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‘Rise in treasury yields’ ? They are crashing.
Bellamy Fernades
Bellamy Fernades Jun 12, 2021 12:48PM ET
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hello friends is me bellamy James so let we start okay
Bellamy Fernades
Bellamy Fernades Jun 12, 2021 12:44PM ET
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can we still negotiate on this
Festus Easy
Festus Easy Jun 12, 2021 12:44PM ET
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yes
Bellamy Fernades
Bellamy Fernades Jun 12, 2021 12:43PM ET
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because all my life is there so I don't know but this market that much
Bellamy Fernades
Bellamy Fernades Jun 12, 2021 12:41PM ET
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tell us how okay tell me how Kathy Lien
Ioannis Lazaridis
Ioannis Lazaridis Jun 12, 2021 11:42AM ET
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...and rise in Treasury yields tells us... If Kathy refers to last week , she made a mistake. Treasury yields fell.
MK MK
MK MK Jun 12, 2021 11:08AM ET
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Buy NZD, AUD against USD and EUR, no chance for alfa's keep this level
NUNO LOUREIRO
NUNO LOUREIRO Jun 12, 2021 10:23AM ET
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I like this "market narrative" dollar high as a late reaction to inflation..... But when they talk about the stock market the narrative is, inflation?? Is temporary
Bellamy Fernades
Bellamy Fernades Jun 12, 2021 10:23AM ET
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you do like it right
Muhammad Younis
Muhammad Younis Jun 12, 2021 10:19AM ET
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I wanna do job but i don't have any idea :(
Festus Easy
Festus Easy Jun 12, 2021 10:19AM ET
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I will like to teach you and you will know it better ok
Mahesh Desappriya
Mahesh Desappriya Jun 12, 2021 3:50AM ET
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Sabir Afridi
Sabir Afridi Jun 12, 2021 2:42AM ET
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paleez job
Robert Morris
Robert Morris Jun 12, 2021 2:42AM ET
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Come to the US. We’re paying people to sit at home and not work!
gc Myers
gc Myers Jun 12, 2021 2:42AM ET
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Robert Morris is that your here instead of working to make your country better. coward
Ioannis Lazaridis
Ioannis Lazaridis Jun 12, 2021 2:42AM ET
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Robert Morris  Same happens in Scandinavia since 1920. If your read history and economic systems  you´ll understand why Finland is the happiest country in the world for 3rd consequent year. Media promote the idea that the American dream is not valid anymore and in Scandinavia is better.
Chris Black
ChrisBlackforex Jun 12, 2021 1:48AM ET
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Risk Appetite on the Greenback next week Euro gain traction from last week losts?
Javier Escamilla
Javier Escamilla Jun 12, 2021 12:47AM ET
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GBP/USD still consolidated from my prespective. EUR/USD might have broken the consolidation but there is plenty of traffic in that zkne to call it a win (could be a fake). Also, indixes closed near ath and shouldnt be directly correlated with the dollar but it is what is.. we will see the upcoming week.
Chukwuma Onyekoanwu
Chukwuma Onyekoanwu Jun 12, 2021 12:23AM ET
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Nitin Maheshwari
Nitin Maheshwari Jun 12, 2021 12:23AM ET
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"and rise in Treasury yields tells us that investors expect policy-makers to discuss tapering". But before CPI data US 10yr was at 1.52 -1.54 and fell after to 1.45. and this fall only compounded next day. So yes people buying US bonds and selling currencies in the process could be reasonable but not the above explaination
Jeff Page
Jeff Page Jun 11, 2021 11:26PM ET
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The Euro will snap back. Our supply of dollars is deep and wide.
Chris Poulos
Chris Poulos Jun 11, 2021 11:26PM ET
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our supply of dollars is as wide as our rear ends.
Daniel Nunez
Daniel Nunez Jun 11, 2021 9:06PM ET
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delayed reaction?..yea right...they waited til 2pm the next to get their heads out of their rear ends?..
Chris Poulos
Chris Poulos Jun 11, 2021 9:06PM ET
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i dont think you can say rear ends on here.
Jokers R Us
Jokers R Us Jun 11, 2021 8:58PM ET
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“Soars”
Chris Poulos
Chris Poulos Jun 11, 2021 8:58PM ET
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those things on your rear end are called 'sores'
Roberto Castillero
Roberto Castillero Jun 11, 2021 8:36PM ET
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I was very surprised with Investors and Traders reacting after one day to the fundamentals and leading economic indicators!
Chris Poulos
Chris Poulos Jun 11, 2021 8:36PM ET
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i was very surprised to find that you can say rear end on here!
DrFunkenstein hayson
DrFunkenstein hayson Jun 11, 2021 7:56PM ET
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buy gold and silver. real money
Mohmed Alkheile
Tiget_ksa Jun 11, 2021 7:45PM ET
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trend down and today still there is no higher high for dollar it's just correction because no enough sellers for dollars or no buyers for EUR and gold . I can't see any strong candle on any time frame
Jay Rhyder
Jay Rhyder Jun 11, 2021 7:18PM ET
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it's no surprise that the FED lies to us... and makes promises they can't keep. Thanks for the article, Kathy.
Abdul Sattar
Abdul Sattar Jun 11, 2021 5:54PM ET
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increasing rate will b a disaster for USD as govt already intend to increase its GDP to debt beyond 100%, any tapering would b lethal overall trend is down for USD.
Jay Rhyder
Jay Rhyder Jun 11, 2021 5:54PM ET
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True. but it's great news for cryptocurrencies.
Frank Go
Frank Go Jun 11, 2021 4:59PM ET
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Thanks for insights Kathy. I'm glad that I hold on earlier today my USD pairs .
 
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