Forex Today: Commodities rise on “reflation trade” dollar edges lower, stimulus news eyed

Yohay Elam FXStreet

Here is what you need to know on Monday, February 22:

Markets are on the back foot amid concerns of a quick return to growth, reflating or even inflating prices, with bond yields, oil and copper on the rise, but the dollar falling. The UK's roadmap of returning to normal, the German IFO Business Climate and news related to US fiscal stimulus are eyed.

Reflation trade: Investors are awaiting what President Joe Biden and fellow Democrats pass in Congress – up to $1.9 trillion in covid relief – and what they might do afterward. The administration is considering vast infrastructure spending. Prospects of high debt issuance have caused a sell-off in bonds, but the higher yields have yet to boost the dollar.

Commodities "supercycle:" China's 2020 growth and prospects of a US rebound have boosted oil prices after a short profit-taking move. It is unclear how Saudi Arabia and Russia will manage output cuts moving forward. Copper has surged past $9,000 amid supply issues on top of expectations for robust global growth.

Bitcoin hit a new high above $58,000, surpassing a valuation of $1 trillion at one point. Ethereum is trading near its record of over $2,000. Tesla's founder Elon Musk touted Dogecoin once again.

Jerome Powell, Chairman of the Federal Reserve, is scheduled to testify before Congress on Tuesday and on Wednesday, yet his prepared remarks may come out as early as Monday. The central banker's comments on inflation, employment and other topics will be closely watched.

UK: GBP/USD is holding onto 1.40 it reached late last week and ahead of a highly anticipated speech by Prime Minister Boris Johnson on easing restrictions. According to reports, he is set to lay out a cautious roadmap to reopening and stress the importance of vaccinations.

Europe: The German IFO Business Climate figures for February are set to show an improvement in sentiment, echoing similar figures from ZEW. EUR/USD has been hovering above 1.21.

Vaccines: Another study in Israel has shown that the Pfizer/BioNTech jabs have dramatically reduced infection and not only disease. The country of nine million has already reached 47% of its population with at least one shot. The US FDA is scheduled to discuss Johnson and Johnson's single-shot vaccine on Friday.

More Five factors moving the US dollar in 2021 and not necessarily to the downside.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

AUD/USD defies Iran war jitters as RBA hike bets double

The Australian Dollar rallies for the fourth straight day against the US Dollar as market mood remains positive amid high tensions in the Middle East, pointing to a resumption of hostilities, as reported by recent news. Despite this, the AUD/USD trades at 0.7027, up 0.44%.

USD/JPY remains confined in a familiar range below 158.50

USD/JPY sees some dip-buying in the Asian session on Wednesday, though it remains confined within a multi-week range near 158.50 as the uncertainty over the timing of the next BoJ rate hike keeps Japanese Yen bulls on the defensive. Meanwhile, hawkish Fed expectations, bolstered by inflation risks stemming from volatile oil prices, underpin the US Dollar. However, looming intervention fears could limit JPY losses and cap the currency pair.

Gold advances modestly; targets $4,150

Gold prices manage to reverse three consecutive daily declines, trading just below the $4,150 mark per troy ounce on Wednesday. The precious metal’s recovery comes amid a slight drop in the US Dollar, mixed US Treasury yields across the board and a widespread cautious tone from the US-Iran front.

Dogecoin Labs launches, resistance looms

Dogecoin (DOGE) Labs launched Wednesday in partnership with the Dogecoin Foundation, bringing together several product teams and technologies to expand the use of the memecoin (DOGE) across payments, decentralized finance (DeFi) and consumer applications. The launch will consolidate MyDoge, DogeOS and Such App under one business, led by Jordan Jefferson, founder of MyDoge and DogeOS.

What the midterm elections mean for Treasury yields, the Dollar and Gold

Democrats are priced to take the House, so November 3 comes down to the Senate and how much Washington can borrow without the other party. Treasury yields will show the answer first, then the Dollar and Gold. On November 3, Americans vote for all 435 House seats and 35 Senate seats. For bond prices, the result comes down to one thing: how much the government will borrow over the next two years.

The US Dollar fell. Gold didn't rally. That tells you everything

Gold (XAU/USD) is struggling to capitalize on a weaker US Dollar (USD), after repeatedly failing to establish itself above the $4,200 level. The precious metal remains confined to a relatively narrow trading range despite a combination of developments that would normally support higher prices.