Daily Market Update

Dollar Set for Fourth Daily Decline

August 22, 2018

The U.S. dollar continued to weaken against most of its rivals overnight. The greenback is set for its fourth daily decline after touching its strongest level in a year last week.

Overview

Yesterday may prove to be a pivotal day for the Trump presidency which saw his personal attorney plead guilty to 8 counts and his former campaign chairman receive a guilty verdict on 8 of 18 counts. Attorney Michael Cohen’s plea deal could be the most harmful to the President as he said his crime was committed “in coordination with and at the direction of the candidate.” Nevertheless, global markets have shown little reaction to the news. U.S. stock futures are slightly lower, but that is only a small hiccup after the S7P touched an intra-day record high yesterday. The bull market turns 3,453 days old today, marking the longest period of uninterrupted gains in American history.

There is no economic data set for release today but we will be paying close attention to the release of the Federal Reserve meeting minutes at 2 p.m. Eastern. As always, traders will be looking for clues as to the central bank’s thinking on future interest rate hikes. Future markets are already pricing in an additional two hikes later this year with the next coming in September. Fed Chairman Powell will speak on Friday morning at the Jackson Hole summit amidst recent criticism from President Trump.

EUR

The Euro popped higher for the fifth straight day against the U.S. dollar, recovering from 14-month lows. The dollar was dragged weaker yesterday on political headwinds but the Euro’s strength this morning can be attributed strong economic data. Eurozone wage growth rose 2.2% in the second quarter, up from 1.7% in the first quarter. The increase marks the highest since 2012. Concern about Italy’s fiscal situation has waned a bit over the last couple of days as 10 year yields have come back under 3.0%, adding to the Euro’s run.

AUD

The Australian dollar bucked the trend of U.S. dollar weakness and was the only G10 currency to fall to the greenback. The Aussie had gained for four straight days against the U.S. dollar. Australia’s Prime Minister Malcom Turnbull narrowly survived a leadership vote, highlighting domestic political challenges. The New Zealand dollar got a boost from strong retail sales data.

 

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