Daily Market Update

U.S. Dollar Retreats ahead of Jackson Hole meeting

August 21, 2018

The U.S. Dollar fell across the board following a dull day that suddenly changed with revelations of President Donald Trump’s dissatisfaction with Federal Reserve policy.

Overview

Reports in the afternoon caused stock gains to decline while the greenback followed suit and dropped by over half a percent per the Bloomberg Dollar Spot Index. The negativity only further fueled a natural depreciation that was merited on better-than-expected positive economic data out of Europe last week.

While the Turkey crisis remains and trade tensions have not gone away, there is feeling in markets that the Chinese and American negotiators can reach some resolution. Nevertheless, additional tariffs will be officially implemented on Thursday. Chaos has aided the buck, but we will see if the safe-haven status can last.

Meanwhile, the markets will wait for any Fed Minutes surprises tomorrow and a speech by Fed chair Jerome Powell on Friday as central banking officials from various regions, including Canada, will meet at Jackson Hole in Wyoming.

 

EUR

The Euro has jumped by 1.8% in the past six days as solid indicators and controversy in the U.S. have improved the Euro-zone’s image. Additionally, quiet achievements such as Greece completing its three-year bailout program are rejuvenating the economic outlook for the overall continental union.

We feel that Italy’s policies, which include tons of spending, may serve as a thorn on the shared currency’s side, but there is a greater sense of optimism now that Gross Domestic Product figures for Q2 outdid Q1. The Euro is on recovery mode and we believe it can last throughout the month and into September.

 

GBP

Sterling is attempting to mount a comeback as it has increased its value by 1.3% in the last six days. The news has been slow in the U.K. with many partaking in holiday, but Prime Minister Theresa May is not sleeping on her Brexit responsibilities.

New Brexit Secretary Dominic Raab has been directed to start speaking with his EU counterpart Michel Barnier and maintain open lines of communication 24/7 in order to reach a deal as soon as possible. An agreement on U.K.-EU separation, to then negotiate on trade, must be done by October. A final trade agreement is due March or potential No-Deal.

 

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