22nd March 2021 - Dollar set to extend gains


Good Morning,


Market Headlines

US yields rose after the Fed announced an end to favorable treatment for bank holders of treasuries. That weighed on US equities, the S&P500 closing down 0.1%. Commodities: Brent crude oil futures rose 2.0% to $64.55, copper rose 0.1%, iron ore fell 3.4% to $160.00, and gold rose 0.5%.


The US Federal Reserve will allow an exemption to the Supplementary Leverage Ratio (SLR) to expire on 31 March. That exemption has allowed banks to hold treasury bonds without setting aside the required amounts of capital to protect against losses, and was put in place during the Covid threat. Banks had lobbied to extend the exemption for at least a few more months. The Fed did acknowledge the need for longer-term changes to the SLR requirement, though: “Because of recent growth in the supply of central bank reserves and the issuance of Treasury securities, the board may need to address the current design and calibration of the SLR over time to prevent strains from developing that could both constrain economic growth and undermine financial stability.”


Overnight Currency Ranges

AUD/USD 0.7689 0.7772

EUR/USD 1.1873 1.1936

GBP/USD 1.383 1.3956

USD/JPY 108.50 109.14

NZD/USD 0.7136 0.7187

USD/CAD 1.2463 1.2548

USD/CNH 6.504 6.522

AUD/JPY 84.07 84.59

AUD/NZD 1.0791 1.0831


AUD Thoughts

A quiet day ahead on the data front with markets likely to remain focused on the continuing inflation debate with global yields and equity markets expected to remain volatile as further information comes to hand.


AUD/USD opening the week under pressure with offering interest now expected nearer Friday’s 0.7775 highs and then above 0.7850, downside demand in the 0.7680 should slow any dip in the early part of the week.


Event Risk Data Today

New Zealand: The Q1 Westpac-McDermott Miller consumer confidence survey will be released. Consumer confidence rebounded in the December quarter following the easing of lockdown conditions and related lift in economic activity.


US: The market expects that the February Chicago Fed activity index will lift to a robust 0.72. Readings above zero imply above-average growth. Meanwhile, February existing home sales are set to pull back 2.8%, with a lack of supply beginning to crimp turnover. Fed Chair Powell will take part in the BIS panel on central bank innovation (00:00 AEDT), and Barkin, Daly, Quarles and Bowman will speak.

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