Daily Market Update

Dollar Rallies As Inflation Hits 40-Year High 

June 10, 2022

The U.S. dollar was in rally mode overnight, gaining against the majority of its G10 counterparts. 

Overview

The Bloomberg Spot Dollar Index was up 0.3% before this morning’s highly anticipated inflation report.   The dollar is extending gains in early trading after consumer prices rose more than forecast last month.  The headline reading showed prices increased 8.6% year over year, higher than the forecast 8.3%.  The month-over-month reading was also higher (1.0% v 0.7%).  The 1% jump was higher than the highest estimate by economists.  Most of the upside surprises came from food and energy.  Indeed, the core CPI reading came down slightly.  Regardless, inflation is now at a 40-year high.Later, the University of Michigan consumer sentiment report will cross the wires.  That print is unlikely to move markets as traders will likely continue to focus on the fallout of the inflation data.

 

What to Watch Today…

  • University of Michigan Consumer Sentiment at 10 a.m. 

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CAD

The Canadian dollar was lower against the greenback overnight as the U.S. dollar gained nearly across the board.  The loonie briefly reversed some of those losses following a strong jobs report.  The unemployment rate fell to 5.1%, the lowest since data collection started in 1976.  Wage gains also beat forecasts.However, the loonie is once again trading on the backfoot as U.S. consumer prices are in focus.  The Canadian dollar is now 0.7% weaker than yesterday’s close.

 

JPY

The beleaguered Japanese yen found some relief overnight and gained 0.4% against the U.S. dollar.  Japan’s Ministry of Finance, the Bank of Japan, and the Financial Services Agency put out a joint statement saying they would “act appropriately if needed.”  The statement is the latest attempt by officials to intervene in markets verbally. The relief rally overnight is still just a drop in the bucket.  The yen is down over 16% against its American rival in 2022 as policy divergence between the U.S. Fed, and the Bank of Japan continues to grow.  At some point, the yen will find a floor. In the meantime, USD/JPY is a powerful, one-way train.

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