Daily Market Update

Dollar survives weekend after pessimism on Fed

July 23, 2018

The U.S. Dollar is trading in familiar ranges after trading within a half percent range band on Friday afternoon following reaction to dovish comments that cast doubt on the dollar.

USD

President Donald Trump is questioning the Fed’s rate path, but he is likely not going to be influential in preventing two more hikes this year. We believe questioning the increases to interest rates make may some sense if economic growth proves to slow down globally by the end of 2018. However, the Fed is not the only institution likely to hike by December. The Greenback’s fate will depend on domestic growth staying consistent.

There is a data-heavy week ahead of us with Gross Domestic Product being the most important risk event at the end. Trade volatility may return specifically on the North American side as NAFTA talks are said to be resumed. We think the buck could stand losing some ground before month’s end, but if GDP impresses above the 4.0% mark, it will be difficult for any one major currency to sustain any gains. 4.3% exactly is the estimate.

 

EUR

The Euro has failed to surge much more than half a percent when there have been dollar-negative headlines throughout the month. Thus far, the shared currency has improved by only a third of a percent since July began. No rally has been sustainable as the economic performance in the Ancient continent does not match the level of growth seen in the U.S. We shall see if also political problems in Italy arise as the coalition currently in power seems to be running into disagreements on how to go about policy. A focus on proposing mostly anti-immigrant measures has been criticized by EU officials.

 

GBP

The Pound Sterling is threading in weak levels after uncertainty over a Brexit deal has shown that the economy has taken some hits. Along with underwhelming GDP figures, prices of homes have gone down as the future of banking services in the U.K. look gloomier. Chances of a hike by the Bank of England at their August 2nd meeting have gone down progressively as less economists feel the BOE should tighten in times of economic drag.

 

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