Fed’s accommodative stance will likely weigh on the greenback
USD: The Fed minutes delivered no negative surprise for risk sentiment, with the committee reiterating no need to rush into tightening of monetary conditions and further support the recovery. We expect the very accommodative Fed to eventually weigh on USD as we move into the summer - rising inflation, yet no signs of imminent rate hikes will push front-end US real rates further into the deep negative, and coupled with the recovering global economy should weigh on USD.
CAD: The loonie slipped modestly, in line with its commodity peers and the somewhat cautious risk mood. Renewed restrictions in Ontario aimed at combatting a jump in virus variant cases may be adding to the soft CAD tone leaving the door open for further losses. There is not much in the form of data releases from Canada today. The currency is likely to trade on broader market themes.
EUR: Limited data points suggest a range-bound EUR/USD today, with the pair hovering around the 200-day moving average of 1.1894. Euro FX staged a meaningful rally yesterday, likely a function of rebounding EUR/USD as well as the forward-looking view on the Eurozone summer economic recoveries (as vaccination is expected to gain pace in the region this quarter).
GBP: The pound underwent a material correction yesterday, on the back of concerns about the slowing pace of vaccination, blood clots issues related to AstraZeneca and its stretched speculative positioning. The UK regulator flagged that the balance of benefits and risks still favours the AstraZeneca vaccine (only below 30s will be offered alternative vaccines), and the UK government reiterated that its plan to offer the first dose to all adults by the end of July remains unchanged. This news moved the GBP sharply lower yesterday though most expect a modest recovery today.
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