US Open Note – Stocks stabilize and dollar on back foot ahead of FOMC minutes

Stocks hover at highs, dollar slips as yields ease, oil ranges

A subdued risk tone is emanating in markets as stocks are holding around their highs but the dollar’s latest weakness seems may continue for a while longer, as 10-year yields (1.65%) provide mild downside pressure. The greenback’s broader feebleness has dipped the dollar index below the Asian session’s low of 92.23 and it appears to be eyeing the 92.00 handle, while this propelled the euro to 1.1880 per dollar.

Safe havens lost their shine, as the dollar failed to improve against the yen, which is currently around 109.85 per dollar and looks to be heading towards the 109.60 and 109.40 per dollar levels. Furthermore, the swissie is declining and is steering towards the 0.9260 francs per dollar mark. Conversely the greenback has outperformed the antipodean currencies.

Nevertheless, the echoes from strong US data lately together with robust vaccine actions remain part of the foundation cementing the worrying narrative in markets around inflation and rising yields. Despite the current paused picture in stocks, optimism in the US is at a high and the tempo moving forward will need to receive a significant blow to put it under jeopardy, especially with upcoming infrastructure and the US’s growing upper hand over the coronavirus.

Nonetheless, today’s highlight is the upcoming FOMC minutes later in the day at 18:00 GMT, and an unexpected shift in the dovish stance reiterated by Chair Powell from the last meeting could hurt the dollar. However, under current circumstances, this may quickly transform into a boost for the reserve currency. On that note, the Fed is expected to remain accommodative towards the recovery as long as it takes for employment to return to pre-pandemic levels. The Fed has repeatedly said that they consider inflation and rising yields to be a part of the recovery process, yet would intervene should these facets aggressively gain an unwanted pace.

All in all, markets are optimistic that the king dollar will soon regain the throne.

Europe and the UK

The Eurozone continues to lag behind the US and the UK and persisting obstacles with the vaccination campaign, and implementing the EU recovery funds of EUR 750bln could quickly see any euro gains wither away as the dollar flashes green again. More delays in the tempo of asset purchases could further nurture this view.

The UK’s immunization speed could slow considerably in April as vaccine supply issues persist, which could inevitably ruin the goal of opening the economy in June and successfully having jabs reach the arms of all adults. The sterling has slipped to 1.3750 per dollar as services PMI data came in at 56.3, missing the forecast of 56.8.   

Oil neutral while the dollar outperforms loonie

WTI oil futures are tackling the $60.00 a barrel handle fuelled somewhat by optimistic expectations of growing demand as the US economy regains its positive pace. Ahead of crude oil inventories, the greenback continued to beat the Canadian dollar, pushing the loonie higher to C$1.2622 per dollar off of a weak exports figure.

Upcoming are Crude oil inventories at 14:30 GMT, while at 16:00 and 17:00 GMT, FOMC Member Barkin and Daly will speak respectively ahead of the FOMC minutes due at 18:00 GMT.

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