Daily Market Update

Dollar Reverses Overnight Gains; Sterling Strong on BOE Surprise

June 21, 2018

The U.S. dollar continued its slow march higher versus most of its European counterparts, save the British pound overnight.

USD

Global equities are lower again today, increasing demand for the greenback and the Swiss franc.

This morning’s economic docket showed that weekly jobless claims continue to be near a four-decade low, a trend that has continued for nearly two years. The greenback is under modest pressure following the release of the Philadelphia Fed which came in at 19.9, missing estimates of a 29.0 expansion. The poor print follows a fairly strong 34.4 reading in May.

The Federal Reserve will release the results of the 2018 Bank Stress Tests later today but they are unlikely to move markets. Instead, we will keep on an eye on developments over trade tensions with our allies and China.

 

EUR

EUR/USD creeped lower again overnight, briefly touching 11-month lows before rebounding this morning. It appears the currency pair is settling into a fairly tight range as poor economic data and policy divergence keep the Euro weak. The dip lower overnight can be blamed on the appointment of two euroskeptics to key posts in Italy’s parliament. The rise of populism in Italy has a main cause of the Euro’s weakness so far this year.

 

GBP

The British pound is rising this morning following the Bank of England meeting. As expected the central bank left rates unchanged. However, Bank of England Chief Economist Andy Haldane unexpectedly voted for an interest rate hike, his first dissenting vote since he joined the panel in 2014. The 6-3 vote to keep rates unchanged shows a bigger split than the 7-2 vote most expected. In addition, traders now see an increased chance of an interest rate hike at the BoE’s next meeting in August. Odds have jumped to 65%, up from 50% before the meeting.

 

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