Daily Market Update

Dollar Crawls Back Yesterday’s Losses; Sterling Whiplash

August 30, 2018

The U.S. dollar had a rough trading day yesterday, losing despite an impressive upward revision to second quarter GDP.

Overview

The greenback is attempting to crawl back some of its losses overnight ahead of a slew of economic data.

The economic docket released reports that were all mostly in line with expectations. Personal spending increased 0.4% and personal income ticked 0.3% higher. The PCE Deflator, the Fed’s preferred inflation reading, held at 2.3% year over year. Initial and weekly jobless claims were also uneventful. The Bloomberg Consumer confidence number will cross the wire at 9:45 a.m.

We will also be keeping a close eye on developments regarding NAFTA Take 2. Both President Trump and PM Trudeau have sounded optimistic that two countries can come to an agreement before tomorrow’s deadline. An agreement will likely boost stocks and weaken the dollar on decreased safe-haven trades. However, some have already priced in a successful negotiation.

EUR

The Euro pushed higher yesterday to reach multi-week highs. However, the Euro is under modest pressure this morning after a report showed that German regional inflation data showed slowing price growth. EUR/USD may take a backseat during our trading session as traders will be closely following trade negotiations, U.S. economic data and Brexit news.

GBP

The British pound has seen a whirlwind of volatility over the last 24 hours and all of it can be attributed to Brexit headlines. The sterling jumped a percent against the dollar in a matter of minutes yesterday afternoon after EU Chief Negotiator Michel Barnier said that he was willing to offer the U.K. an “unprecedented partnership.” However, Barnier seemed to walk back these comments early this morning and warned that the union “must prepare for a disorderly Brexit”, causing the sterling to immediately fall. The see-saw is strong example of how the sterling’s fate is tightly tied to Brexit headlines.

 

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