Dollar under pressure this morning
Equity markets sold off sharply and bond yields fell in the US yesterday, and while the dollar managed to hold its own for the most part (unlike last week when it lost considerable ground alongside declining stocks and bond yields), it is under some pressure this morning. The euro is trading at a new 2025 high of about $1.09, while sterling is back above the $1.29 level albeit still shy of last week’s year to date high of almost $1.2950. The single currency is also nudging up against the pound, trading at around £0.8430 at the start of play today.
US stocks fell sharply in the opening session of the week, led by a 4% fall in the Nasdaq, amid ongoing concerns about the outlook for the US economy, with Trump’s comments that his administration’s policies will mean a period of adjustment and transition for the economy not helping sentiment. Asian equity markets were lower overnight, though European stocks have opened slightly higher this morning having shed around 1.5% yesterday. In bond markets, US yields were a good bit lower – by around 10bps in the case of 2- and 10-year yields – as Fed rate cut expectations firmed some more, with about 75bps worth of cuts for the year now priced in. German and UK yields were little changed overall yesterday and it’s much the same in early trading this morning.
The New York Fed’s latest survey of consumer inflation expectations was reassuring (relative to other similar surveys recently), with 1-year ahead expectations up marginally in February (to 3.1%) but 3- and 5-year ahead expectations both unchanged (at 3%). Less reassuring in the survey though was an increase in the share of households expecting a deterioration in their financial situation, which rose to over 27%, the highest level since November 2023.
The latest sentix index of investor sentiment in the Euro area jumped this month, led by a sharp rise in the expectations component, driven by last week’s announcements of “debt-financed armaments programmes (EU and Germany) and infrastructure investments (Germany)”. At the same time, the equivalent index for the US “slumped” in March, falling to its lowest level since the financial crisis in 2008.
The economic data calendar is relatively light for the day ahead, with only job openings and the small business optimism index due in the US, while it is also fairly quiet as well in terms of scheduled central bank speakers.