The U.S. Dollar has fallen to a three-week low in the midst of an equity recovery across the globe as stocks climbed after weeks of anxiety over trade.
Tomorrow, the U.S. will be officially imposing additional tariffs on Chinese goods, which thus far has sunk the Yuan along with commodity-based currencies lately.
On the other hand, the Euro and other major currencies are about half a percent higher because of renewed optimism in regards to the ability of other central banks to tighten monetary policy via cutting quantitative easing and increasing interest rates sooner rather than later.
Data-wise, the greenback did not find much support in the form of additional jobs as the ADP Employment Report failed to meet expectations of 190K, instead just reaching 177K. This could be an indication of potential downfall for the buck as we close the week since we will get the official Employment Situation tomorrow and the estimate is higher at 195K. We have Purchasing Managers Index figures later at 9:45AM, which could maybe impact flows a bit in a slow day after America’s birthday holiday.
The Euro improved following the hawkish nature of comments from European Central Bank officials who believe the economy can handle higher interest rates earlier next year than forecast. For a while, Euro bulls have waited for any signal that the ECB would consider hiking and they finally got it. The central bankers are more confident now than before as they get ready to cut off QE in September and let the economy roll on its own without the financial intervention. Nevertheless, we think gains will be modest as the EU deals with trade concerns and Q1-Q2 figures require improvement in the months to follow across many indicators.
The Pound rose, but only to see some light after worries that a “Hard Brexit” may be on its way. Prime Minister Theresa May has meetings coming up over her Brexit plan as she tries gathering support for a controversial plan that does not seem to satisfy businesses or her party allies. Resilience is the only reason why the “Quid” is above 1.30s in our opinion.