Daily Market Update

U.S. Dollar falling as swings continue

September 06, 2018

The U.S. Dollar is trading in mixed ranges, mostly losing ground to its counterparts as majors and some commodity-based currencies push towards recovery.

Overview

Emerging markets continue to be a cause for concern as the contagion has been widespread. In addition, more tariffs on China are on the way, which will keep many nations guessing how to adjust to maintain business flows. The current situation allows for the greenback to experience minimal losses as the country’s economy remains a source for faith in the midst of chaos.

ADP Employment Report released this morning showed less payrolls added than expected in August, registering at 163K instead of 200K. Tomorrow’s official Employment Situation is expected to show Non-Farm Payrolls to add 198K, which is still realistic regardless of what the private data revealed. We see the buck likely to stay in swings because deals are being worked on and volatility is not going away.

EUR

The Euro improved as a result of good news on the Italian budget front and decent economic indicators for the region. Purchasing Manager’s Index expanded as expected and although some figures like Retail Sales and Factory Orders did not meet the forecast, it is believed that the European Central Bank is satisfied and convinced that it is time for QE to go.

We shall monitor Italy closely, but for now the government is promising to stick to EU regulations and limits on spending. As a reminder, Italy’s national debt represents 130.0% of its Gross Domestic Product. That previous number is not “13.”

GBP

Some confusion over the direction of Brexit talks and set deadlines caused panic and further established fears of a convoluted separation. A report yesterday had indicated that the EU was trying to scale back the already-agreed terms of the relationship with the U.K., which German authorities later denied.

At first, markets worried that this meant a no-deal situation and gridlock, but the official rejection of the story resulted in traders taking a breather. It seems like now any sort of deal that can be achieved, will be seen as positive after such drag this year. Sterling is under pressure, but re-gained half a percent overnight.

 

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