The U.S. dollar was mostly flat overnight but is losing slightly to open the American trading session.
The greenback was under pressure on Friday after Federal Reserve Chairman Jerome Powell gave a speech that was labeled as “dovish.” Powell held that he does not see a spike in inflation and that the central bank sees little reason to tighten policy aggressively. Still, future markets expect the central bank to hike rates twice more this calendar year.
While we do not expect any major breakthroughs, we will keep an eye on any progress (or lack thereof) with regards to trade deals. China and U.S. officials failed to make progress last week amidst threats of increased tariffs. The U.S. and Mexico negotiations may see some headlines as soon as today which could affect USD/MXN.
This week’s economic docket is backed loaded. Today sees the release of the Chicago and Dallas Fed, followed by the Richmond Fed and the Conference Board’s consumer confidence tomorrow. Wednesday sees a revision of the impressive 4.1% second quarter GDP and personal consumption, followed by personal income and spending on Thursday morning. The University of Michigan Consumer confidence print is due out on Friday.
The Euro hit a bit of a speed bump overnight before regaining its momentum against the U.S. dollar. Italian political risk continues to be a thorn in the side of the common currency. Italian Deputy Prime Minister Luigi di Maio said that Italy will being the process of opposing the EU’s next budget after the bloc’s member states failed to follow through on a deal reached in June for handling the flood of migrants.
EUR/USD is at a three-week high.
British banks are closed today for the summer bank holiday. We expect volatility to increase as the summer wraps and pressure to secure a Brexit deal mounts. The initial deadline for a deal is just over a month away. Brexit uncertainty has led the sterling to fall for five consecutive months against the dollar.