The dollar extended its banner run of 2022 on Monday, pushing higher following the latest solid US jobs data as equities retreated in both New York and Europe.
The US currency, which has already struck multi-year highs against the euro and other leading currencies, rose as investors bet that the latest round of US employment data released Friday will confirm a Federal Reserve plan to continue aggressively hiking interest rates.
This week’s calendar includes the latest US consumer price index data, which will give an updated reading on inflation that has prompted a 180-degree turn from the Fed’s easy-money policies to a streak of significant interest rate hikes.
“Inflation remaining stubbornly elevated would threaten to upset the market apple cart and buoy the dollar,” said a note from Joe Manimbo of Convera.
Analysts said Monday’s gains by the greenback also reflected the worsening Russia-Ukraine conflict, which has bolstered the dollar’s standing as a “refuge” investment.
US stocks finished a choppy session lower, joining European bourses in retreating.
This week’s calendar also includes retail sales for September, as well earnings from Delta Air Lines, JPMorgan and others.
Investors are cautious ahead of the earnings period, with rising costs expected to cut into corporate profits.
Analysts now project the S&P 500 companies scored an earnings increase of 2.9 percent per share, down from the 10.5 percent that had been forecast in June, according to CFRA Research.
“We’re seeing mild risk aversion in the markets at the start of the week, perhaps some apprehension ahead of what could be a big few days for the US,” said market analyst Craig Erlam at OANDA.
Elsewhere the pound won little support from Britain ramping up efforts to calm markets after a heavily criticised budget.
In what was seen as coordinated action, the government brought forward the release date of key economic forecasts and the Bank of England boosted liquidity.
“With the pound remaining weak and (UK) government borrowing costs inching up again towards worrying levels, the UK government and the Bank of England have launched a two-pronged attempt to calm markets,” noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
Oil prices meanwhile fell after the biggest weekly gain since March that followed last week’s decision by OPEC and allied producers led by Russia to slash crude output by two million barrels per day.
The drop Monday came also on demand concerns caused by China’s Covid flare-ups and more weak data out of Beijing owing to lockdowns.