Daily Market Update

Dollar Rises to Three-Week High

September 05, 2018

The U.S. dollar climbed higher against the majority of its counterparts as a rout in emerging market equities led investors to the relative safety of the greenback.

Overview

The dollar is up for a fifth day and is at a three-week high. Overall the Bloomberg Spot Index has climbed nearly 7% since mid-April.

The greenback did wobble a bit after the Fed’s Kashkari said that the crisis in emerging markets could spill over into the U.S. economy. But his commentary was quickly dismissed as it’s unlikely to throw the Fed off their rate-hiking path.

There is no major economic data slated for release today. Although data did show that the U.S. trade gap widened to over 50 billion dollars, the largest since 2015, according to the Commerce Department. Specifically, the gap with China rose to a record high even as the U.S. implements trade tariffs on Chinese goods. The trade deficit with the European Union also jumped to a record high.

The Bank of Canada will meet at 10 a.m. Eastern today. The central bank is not expected to raise rates today but odds have risen for a 25 basis point jump next month.

AUD

The Australian dollar remains under pressure and touched a fresh two-year low against the U.S. dollar as a fall in emerging markets boosted the greenback. The AUD slip comes even after better than expected data was released. Second quarter GDP rose 0.9% quarter over quarter, beating a forecasted gain of 0.7%. Yearly GDP was up to 3.4%, the fastest pace in six years.

GBP

The British pound fell to a two-week low against the U.S. dollar despite the release of rather rosy economic data. U.K. Services PMI expanded faster than expected in August (54.3 v. 53.9). But Brexit concerns remain the predominate force behind sterling moves. Prime Minister Theresa May will make an emergency statement on national security to Parliament today which should draw considerable attention.

 

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