Daily Market Update

Dollar Rally Stalls as Risk Environment Improves

August 16, 2018

The U.S. dollar weakened during the second half of yesterday’s trading session and the trend continued overnight as sentiment shifted towards “risk on.”

Overview

European stocks and American futures ticked higher following reports that the U.S. and China will resume trade talks at the end of August, throwing some cold water on the dollar’s recent rally.

The beleaguered Australian dollar was the biggest winner of the G10 currencies overnight, finding reprieve on the brighter trade outlook. The Aussie has taken a beating and is down 8% in the past six months due to the trade tensions between the U.S. and Australia’s biggest trading partner, China.

This morning’s economic has had little effect on the greenback so far which is a good thing because the readings have been lackluster. Jobless claims came in line with expectations. But Housing Starts and the Philadelphia Fed missed estimates. The University of Michigan consumer confidence will round out the week’s data tomorrow.

 

EUR

The Euro was slightly higher against the U.S. dollar overnight continuing its momentum from yesterday. EUR/USD still remains near a 14-month low.

German whole sale prices advanced slightly but will have little to do with ECB decisions. Euro trade data disappointed slightly with a narrower than forecast trade surplus reported.

We will continue to watch developments in Turkey and the implications for European banks.

 

GBP

The British pound gained overnight but has since given up most of its gains. Trader’s appear unimpressed with stronger than expected retail sales. Sales rose by 0.7% month over month, beating expectations of a 0.2% gain. Some analysts are giving credit to euphoria and purchases surrounding England’s run in the world cup. We believe that is more anecdotal but interesting nonetheless.

 

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