The dollar is higher for the 5th consecutive day as traders continue to rebalance positions and bring exposures into alignment with shifting Fed rate policy. Last week’s higher-than-expected CPI data for March (consumer inflation) sparked a prolonged market adjustment touching all financial assets. Stubborn inflation has compelled the Fed to revise its rate policy outlook, signaling its intention to maintain the overnight rate at the current 5.50% target until inflation resumes its lower trajectory.
The U.S. Dollar index is +0.05% today and +2.2% since last Wednesday. The dollar is higher by a wide margin vs. all G10 currencies and even higher vs. emerging market pairs: +4.86% vs. BRL, +3.65% vs. MXN, +3.35% vs. AUD, +2.90% vs. NZD, +2.87% vs. ZAR, and several sub-2% gains.
U.S. 10-year yield is +0.05% today leading all tenors and is +0.299 bps since last Wednesday, a clear signal of the market’s expectation of a reduced number of rate cuts this year.
Monthly Housing Starts for March were -14.7%, sharply lower than the -2.40% estimate, and a near reversal of February’s +12.7%. Building permits showed a similar result, lower than the estimate but a 2x reversal of February (-4.3% vs. +2.3%).
