After falling yesterday, the greenback is slightly better against its major counterparts while making big gains against the Australian dollar, the Swedish Krona, Mexican peso and South African rand.
Despite the burst of strength overnight, the Bloomberg Dollar Index remains near a two week low.
The Canadian dollar and Mexican peso may see a spike in volatility during the second half of this week on NAFTA-driven headlines. In the first hour of trading in the New York Session today, USD/MXN has seen a whiplash of nearly 0.8%. The United States is taking a hard line approach to its Friday deadline to complete deal with Canada even though Canada just rejoined trade talks yesterday after an apparent deal was struck with Mexico. Two different publications are reporting that Canada is prepared to make dairy concessions to the United States. Some analysts have shrugged at the apparent deal with Mexico, arguing it will do little to improve the U.S. labor market or better trade imbalances. Equity market, however, have enjoyed the news and risen to near records.
Outside of NAFTA news, the big fundamental news came from a revision of second quarter GDP this morning. Annualized quarter of quarter GDP rose to an impressive 4.2% in the second quarter, beating previous estimates of 4.1% growth. Economists had forecast that the print would be slightly downwardly revised to 4.0%. Personal consumption was downwardly revised but will not take the shine of the growth number.
The Euro’s march higher against the U.S. dollar took a break overnight as Italy was back in the headlines and pulling the common currency lower. Newspaper La Stampa reported that Italy might reach out to the European Central Bank for a new round of government-bond purchase to stem the threat of a rating downgrade. The ECB has refused to comment on the report.
On the data front, German consumer confidence fell slightly while French consumer spending gained.
The British pound ticked higher against the U.S. dollar overnight but has quickly given up those gains as our trading session has begun. Just yesterday we reported that British officials were still working towards an October deadline for a Brexit deal. But that story seems to have changed as some officials are now indicating the deadline has been pushed back to November. While the added time provides more wiggle room for negotiators, the uncertainty will be extended as well.