Daily Currency Update

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Inflation concerns steady markets

USD - United States Dollar

Concerns over inflation were put in check this morning after the Consumer Price Index revealed a 0.4% rise in prices for February.

Critics of the $1.9 trillion stimulus package have argued that the stimulus would ignite inflation concerns. And their argument gained strength last week. Bond yields, which are correlated with inflation, rose through the week. With the House of Representatives about to approve the American Rescue Plan, February’s price index increase was mild.

The US Dollar Index was down a third of a percent this morning, after falling to 91.8 in early trading.

Key Movers

The European Central Bank are expected to leave their economic fight against COVID largely unchanged. It’s been suggested that their stimulus envelope may be altered, however interest rates will hold steady and new forecasts will be offered. Their growth expectations could remain lower than most of the world, partly down to the current vaccine struggle.

Optimism around the UK economy continued. Andrew Bailey, governor of the Bank of England, suggested that the long-term damage from the pandemic may not even match that of previous recessions. Bailey diagnosed the UK economy and said, “it’s positive, but with large doses of cautionary realism.” An OECD report echoed his sentiment and suggested that global economic growth should be close to 5.5% next year, with UK growth expected to be 5.1%.

The Australian dollar remained vulnerable to fluctuations in risk trends. The AUD rebounded through trade on Tuesday, as market sentiment flipped and demand for risk assets improved. Having touched intraday lows at 0.7620 the AUD climb steadily throughout the trading day, breaking back above 0.77 to mark intraday highs at 0.7721. With little of note on the domestic or global macroeconomic ticket markets pounced on reports Chinese state run/backed investment funds were stepping in to defend the local equity market.

Expected Ranges

EUR/USD: 1.187 - 1.192 ▼

GBP/USD: 1.384 - 1.393 ▼

AUD/USD: 0.767 - 0.773 ▼

USD/CAD: 1.262 - 1.268 ▼