Forex news for North American trading on April 22, 2021:
- ECB leaves key rates unchanged in April monetary policy meeting, as expected
- Lagarde opening statement: Vaccine underpins expectation of a 'firm' rebound in economic activity
- Lagarde Q&A: Our views are largely the same as in March
- Biden aims to nearly double capital gains taxes above $1m to pay for child care and education
- US initial jobless claims 547K versus 610K estimate
- US March existing home sales 6.01m vs 6.11m expected
- KC Fed April manufacturing index 31 vs 28 expected
- Eurozone April flash consumer confidence -8.1 vs -11.0 expected
Markets:
- Gold down $10 to $1783
- US 10-year yields down 0.5 bps to 1.55%
- S&P 500 down 35 points to 4137
- WTI crude oil up 25 cents to $61.61
- JPY leads, NZD lags
Overall, this was a day that makes you shake your head. The main market mover was a story about Biden nearly doubling the capital gains tax.
This was a campaign promise and we know tax hikes were coming so I'd argue it should have been priced in. Beyond that, the story first broke in the NYT early today and was covered here. Yet when it broke the second time, three hours later on Bloomberg with a red headline, that's when the market freaked out. Risk trades dumped -- particularly the antipodeans -- and the US dollar and yen rallied. It was a bigger deal in equities that FX but it was the main theme earlier in the day.
The ECB decision was a bit of a dud but expectations were low to begin with. There was some speculation about a more-upbeat outlook but Lagarde was cautious. Partway through the press conference, the euro hit a session high but it struggled afterwards in part due to USD strength, falling to 1.1994. No doubt some were gunning for stops below 1.2000 but they never really materialized.
Sterling struggled throughout the day in part due to EUR/GBP selling. Cable has given back much of the pop to 1.40 early in the week. The selling was relentless down to 1.3827 followed by a modest bounce and then more selling down to 1.3825. It's been a tough slog for GBP traders this year with every move retracing.
In a move that warmed the hart of macro and rate differential traders, CAD stayed bid today and USD/CAD fell to 1.2473, just shy of yesterday's low. Commodity prices were broadly higher again with grains especially strong (+5%). This was mostly about the BOC though and yesterday's surprise moves.
