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Consumer Price data for March was reported +0.6%, better than the +0.5% estimate and outpacing February’s +0.4%. Combine this with last week’s Producer Prices release at +1.0% and it appears inflation is beginning to make its long-awaited debut.

The dollar weakened following the CPI data since the modest +0.2% monthly gain will likely keep Fed policy on hold. The U.S. dollar index was trading +0.20% prior to the CPI release but is now -0.24% for the day. News that the FDA & CDC had jointly suspended the Johnson & Johnson covid-19 vaccine had been weighing on the dollar earlier in today’s session.

The impact of the CPI data on the USD/CAD & USD/MXN was pronounced, the Canadian dollar gaining 0.67% and Mexican peso gaining 0.89% following the release. Support at 20.0500 (long-term trendline) is preventing further peso gains.

Treasury yields have slumped in lock step-with the lower dollar. The benchmark 10-Year Treasury yield is lower by 0.041 basis points to 1.6278%, approaching support at 1.6000%. Gold is higher by 0.80% but remains rangebound between $1,758 and $1,676 since late February.

Bitcoin reached a new all-time high today at $63,753. Today’s high marks the 7^th weekly record for 2021. A total of 18.6 million bitcoins have been mined of the total possible 21 million, or 89%.

Americas

The U.S dollar index is about unchanged since last Thursday’s close with support at 92.000 preventing further dollar declines. The dollar is mixed today in narrow trading ranges vs. the G10 currencies: +0.39% vs. SEK, +0.22% vs. CAD, and -0.26% vs. GBP, -0.23% vs. JPY, -0.16% vs. NOK. Emerging market currencies have gained on the dollar: BRL +0.72%, MXN +0.31%, and ZAR +0.21%.

Although currencies have been quiet for last few days the dollar index is -1.25% for April, with the primary dollar declines -2.12% vs. CHF, -1.87% vs. SEK, -1.66% vs. MXN, and -1.48% vs DKK and EUR. Dollar returns have generally followed treasury yields lower with the key U.S. 10-Year yield down 6.2bps since the March close at 1.742%.

The USD/MXN has reached support at 20.0500, a true textbook retracement to trendline support in place since the week ending February 19^th. Now we wait to see if peso bulls have the appetite to break support and make a run at 20.0000 and test next support at 19.8500.

USD/CAD continues to trade inside a 1.2625-1.2500 4-week range. Despite the recent stall the monthly and weekly charts continue to point to a lower USD/CAD. A weekly close above 1.2650 is needed to signal a trend reversal.

There are several key economic releases later this week. The earliest report is tomorrow’s Monthly CPI, a key inflation reading which is forecast +0.5% for March. Later reports include Retail Sales, Empire Manufacturing, Philadelphia Fed Business Outlook, and Industrial Production.

Americas

The U.S. dollar index is unchanged today vs. yesterday’s close with the dollar gaining vs. the JPY, CAD, and GBP but weakening against the EUR, CHF, and SEK. Aside from the index currencies the dollar is generally higher overnight: +0.61% vs. AUD, +0.47% vs. NZD, and +0.18% vs. MXN.

USD/CAD has reversed course since Monday’s decline with the greenback gaining 0.73% over two days. The Canadian dollar is under renewed pressure in part due to Ontario’s announcement of another 4-week stay-at-home order starting Thursday. Next resistance is at 1.2650 and higher at 1.2740 (100-day moving average).

Long-term Treasury yields are holding onto slim gains ahead of today’s release of the minutes from the FOMC’s March meeting. The 10-year yield is up 0.2 basis points, 15-year +0.4 basis points, and the 30-year +0.6 basis points. The meeting minutes are set for release at 2pm ET.

Mortgage Applications data for the period ending April 2^nd reported today were -5.1%. Higher yields and the associated higher cost of borrowing are beginning to put the cost of home ownership out of reach for some.

The S&P 500 Index set new consecutive record highs on Monday and Tuesday, trading above 4000 for the first time and closing at 4,077.91 yesterday.

Americas

The U.S. dollar index peaked last Wednesday at a high of 93.437, capping a two-week surge of 2.18%. The dollar index has since given back 0.95% of those gains, including a 0.50% drop today.

The dollar is mixed vs. the G10 currencies; -0.33% vs. the SEK, -0.25% vs. JPY, and -0.14% vs. CHF, DKK, and EUR. And +0.43% vs. GBP, +0.31% vs. NZD, +0.30% vs. CAD, +0.28% vs. NOK, and +0.20% vs. AUD.

Treasury yields are lower with the benchmark 10-Year yield below 1.700% once again. Another wave of Covid infections has once again dampened the crowded recovery trade, pressuring yields and leading to a 6.2% decline in oil yesterday.

The dollar continues to decline vs. Mexican peso with the USDMXN -0.52% today, reaching its lowest level since mid-February. Textbook support at 20.0500 is within easy reach now.

Americas

The U.S. dollar index is higher today by 0.35%, trading above 93.000 for the first time since November of last year. The dollar has gained in eight of the last nine trading days, continuing the weekly trend higher which is now in its 9^th week. Next resistance is at 94.500 (+1.34% from the current level) and then 96.125 (+3.09% from current).

The dollar is higher against all the G10 currencies with the widest gains vs. the safe-haven CHF (+0.45%) and JPY (+0.41%). Other gains are +0.34% vs. AUD, +0.33% vs. EUR, and +0.29% against the GBP & CAD.

Outside of the G10 currencies the dollar has declined vs. a basket of emerging market currencies: -0.64% vs. BRL, -0.23% vs. MXN, -0.11% vs. TWD, and -0.10% vs. ZAR.

Lower safe-havens and higher emerging markets signal a revival in ‘risk-on’ positions. Anticipation for a global economic recovery from Covid-19 is once again driving decisions about strategic investments.

The 10-Year Treasury yield has moved higher over the last four trading days after closing at 1.601 last Wednesday. Higher yields provide more incentive to own dollars as the cost of borrowing increases.

Consumer Confidence for March was reported at 109.70, beating the 96.7 estimate.

Americas

The U.S. dollar index is higher today by a slim 0.15%. Currencies traded in narrow ranges overnight with the dollar +0.38% vs. JPY, +0.29% vs. SEK, and lesser gains vs. NOK, DKK, EUR, CAD, CHF, and NZD. The dollar’s G10 losses are -0.12% vs. GBP and -0.04% vs. AUD. The dollar is lower against key emerging market currencies: -0.48% vs. RUB, -0.35% vs. ZAR, and -0.31% vs. MXN.

Weekly Jobless Claims for the week ending March 20^th were 684k, better than the 730k estimate, and the first time claims have been below 700k since the Covid-19 outbreak a year ago. Continuing Claims for the period ending March 13^th were 3.870mio vs. the 4.0mio estimate. More welcome economic news is in today’s 4^th quarter GDP figures, reported at +4.3% vs. a +4.1% estimate.

USD/MXN: the peso is higher today after YoY Retail Sales for January were reported at -7.6%, better than the -8.1% estimate. Monthly Retail Sales were +0.1%, a nice surprise to the upside vs. the -1.2% estimate. The Bank of Mexico announces overnight rate policy today at 3pm ET. No change is expected from the current 4%.

EUR/USD traded below 1.1800 today for the first time since last November.

GBP/USD: previous support at 1.3800 is now resistance after breaking below that level on Tuesday.

Treasury Yields continue to retreat with the U.S. 10-Year yield now at 1.594%, some distance from the 1.753% high last Thursday.

Volatility in crude oil markets continues with prices -3.22% today. Over the last week oil has seen daily swings of -7.12%, -6.16%, and +5.92%.

Americas

Overnight the dollar gained against 7 of the 10 G10 currencies. The widest gains were +0.30% vs. the NZD & GBP, and smaller gains vs. the CHF, DKK, EUR, JPY, and AUD.

The dollar declined -0.62% vs. the NOK, -0.04% vs. SEK & CAD. Oil prices have rallied today by 2.58%, offsetting some of yesterday’s -6.16% drop and lifting the commodity currencies in the process.

Emerging market currencies are higher today: MXN +0.51%, ZAR +0.46%, and BRL +0.05%.

USD/MXN continues to trade between its recent 5-week ranges (21.6310 high, 20.2750 low) at 20.7000.

USD/CAD is essentially unchanged today but is higher by 0.75% for the week. USD/CAD is trading in a long-term downtrend with trendline resistance at 1.2750.

The AUD/USD was -1.58% yesterday and traded below 0.7600 in trading today. Support at the 100-day moving average is limiting additional AUD losses for now.

Durable Goods Orders for February were -1.1%, compared to the +0.5% estimate. Missing the estimate is one thing but getting the direction wrong on major economic data releases hints at entrenched underlying weakness. MBA Mortgage Applications through the week ending Mar 19 were -2.5% vs. -2.2% previous.

Americas

The U.S. dollar is trading at its highest level in two weeks as market participants shift to safe assets. Germany’s overnight announcement of an Easter ‘hard’ lockdown and a four-week extension of existing lockdowns was a surprise for investors who had amassed post-Covid positions. Talk of a ‘third-wave’ Covid outbreak tied to fast-spreading mutations of the virus highlights the peril of discounting Covid-19 too soon.

The U.S. dollar index traded to a high of 92.185 as it distances itself from support near 91.000.

USD/CAD is +0.39%, the 4^th daily consecutive gain for the USD. Last week’s multi-year low at 1.2361 is now key support.

USD/MXN is +0.53% but trading within recent ranges, resistance at 20.8500 and support at 20.3000.

NZD/USD is -1.86%, today’s biggest loss vs. the USD. New Zealand’s government announced that it would remove tax incentives for real estate investors in an effort to open up more affordable housing (and prevent a housing bubble). Support at 0.7000 (low from late December) should provide initial support. Major support is seen at 0.6800.

Today Fed Chairman Powell and Treasury Secretary Yellen begin two days of hearings before Congress. Questions will likely center on inflation, employment, and the ballooning deficit in light of the $1.9 trillion ‘pandemic relief’ package recently passed (and another $3 trillion package now being discussed).

Americas

Currencies traded in narrow ranges overnight and are little changed from yesterday’s closing levels. The U.S. dollar scored minor gains vs. all the G10 pairs, with the widest advances vs. the commodity currencies again, in a repeat of yesterday where slumping oil prices weighed on oil-exposed economies.

Dollar gains today: +0.79% vs. NOK, +0.58% vs. SEK, +0.38% vs. GBP, +0.34% vs. AUD, +0.33% vs. CHF, +0.26% vs. CAD, and sub-0.25% gains vs. DKK, EUR, NZD, and JPY.

The one area of dollar weakness is vs. emerging market currencies with the Mexican peso leading all gains today, +0.83%. The U.S. announced it was sending 2.7mio Covid-19 vaccine doses to Mexico to help augment the 4.74mio doses already administered. Peso strength and weaker oil normally don’t mix, but for new Covid relief can make an exception.

Oil prices were down 9.91% at one point yesterday at 58.20 but managed to close at 60.00 for a loss on the day of 7.12%. Oil markets are notoriously volatile, but yesterday’s rout was one of the bigger historic moves. Renewed Covid-19 lockdowns in Europe have suddenly dampened market expectations for a near-term economic rebound, driving oil bulls to the sidelines.

Long-term treasury yields (20-, 25-, 30-year) are lower, and the 2-15 year yields just turned higher.

Where do we go from here? Now that the $1.9 trillion Covid relief bill has been signed, the Fed has made its rate policy through 2023 clear, and vaccinations are generally available, what is left to guide trading decisions going forward? The big pieces are in place, so now we get the recovery, right? Hopefully it will be that simple.