The greenback ended the day lower against majority of its peers (except vs jpy) on Monday due partly to the return of risk sentiment on the dally in US stocks. (Dow ended the day at 33,876, up by 586 points or 1.76%)
Reuters reported the tilt by Fed policymakers to a faster expected start to interest rate increases was a reaction to an economic outlook that took a sharp turn between December and June, Dallas Federal Reserve president Robert Kaplan said on Monday. As of December the path of the coronavirus pandemic remained uncertain, but "when we got to March it was clearer that we were going to get the pandemic under control...By the time we get to June...you've really got a big upgrade" that made the core of officials expect rate increases in 2023 instead of 2024, said Kaplan. "What you are seeing...is monetary policymakers simply reacting to the dramatically improved economic outlook."
Versus the Japanese yen, although dollar dropped to session lows at 109.72 in Asian morning on fall in U.S. Treasury yields, price erased its losses and rallied to an intra-day high at 110.34 near New York close on a jump in US yields.
The single currency traded sideways in New Zealand and briefly edged down to session lows at 1.1848 in Asia. However, price then rose to 1.1898 in European morning and then ratcheted higher to an intra-day high at 1.1921 in New York on return of risk sentiment due to rally in U.S. stocks.
The British pound also traded sideways in New Zealand before falling to a fresh 2-month low at 1.3787 in Asia. The pair then erased its losses and rallied to 1.3887 in Europe on cross-buying of sterling before ratcheting higher to an intra-day high at 1.3936 near New York close on dollar's weakness due to return of risk sentiment.
In other news, Reuters reported the pandemic still weighs on the euro zone economy but growth could still rebound quicker than now expected as consumers begin spending again, European Central Bank President Christine Lagarde told European lawmakers on Monday.
"While on the downside, the spread of virus mutations continues to be a source of risk, on the upside, brighter prospects for global demand and a faster-than-anticipated increase in consumer spending could result in an even stronger recovery," the told a European Parliament committee. Lagarde added that it was not yet time to allow interest rates to rise, so the ECB would maintain favourable financing conditions.
Data to be released on Tuesday:
Australia Westpac consumer survey, U.K. PSNB, PSNCR, CBI trends orders, Italy industrial sales, U.S. redbook, existing home sales, Richmond Fed manufacturing and EU consumer confidence.
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