Daily Market Update

Dollar Retreats as Euro Stocks Climb

June 24, 2022

The U.S. dollar slid modestly overnight as risk-on trading was in full force in Europe.  The Euro Stoxx 600 is currently up 1.5% and is set for a small weekly gain.

Overview

American futures are also set to open higher.  If the S&P can hold gains during today’s session, the major index will close up 3.0% on the week. Despite some weakness in the greenback over the last two sessions, major currency pairs have found fairly tight ranges this week as traders grapple with growing recession concerns and how it might affect future interest rate policy. There are two Fed speakers on today’s docket with San Francisco Fed President Daly making two separate appearances.   On the fundamental front, the University of Michigan consumer sentiment survey will be released at 10 a.m.  New Home sales will hit the tape at the same time.  Barring a major surprise, we could see a quiet day as summer trading takes hold.

 

What to Watch Today…

  • U of Michigan sentiment at 10 a.m.

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EUR

The Euro seesawed between modest gains and losses overnight.  EUR/USD is up 0.2% from yesterday’s close at the time of writing.  The beleaguered common currency is set to achieve a small weekly gain of 0.4%, which would be its best weekly performance this month. While it is still our belief the Euro is generally oversold, the common currency’s short-term gains may be limited by diverging interest rate expectations.  Traders are paring expectations of aggressive action by the European Central Bank.  Indeed, futures show traders are pricing in less than 150 basis points of rate increases by the end of the year for the first time in two weeks, per Bloomberg.

 

CAD

The Canadian dollar was also able to take advantage of general U.S. dollar weakness.  The loonie is finding favor as risk assets rally and the price of oil shot higher.  WTI crude futures are up 1.6% at the time of writing. The economic docket also supported a stronger loonie.  Canadian April Nonfarm payrolls rose 126K, up from 118K in the month prior.

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