The U.S. dollar is down across the board this morning, bouncing off of recent highs against a handful of its rivals.
Overall, the Bloomberg Dollar Spot Index touched a one-week low.
Currencies, in general, were mostly out of the spotlight yesterday as a global sell-off in equity markets grabbed headlines. The DOW Industrial average dove 800 points, its biggest fall since February. The Nasdaq and the S&P fell 4.0% and 3.3%, respectively. The rout continued overnight with markets in Asia and Europe down significantly. President Trump blamed the Federal Reserve, calling their move to hike interest rates “crazy.” Analysts also pointed to the continuing trade war with China and reduced profits of U.S. corporations as other reasons for the sell-off. Futures show American stocks will open lower again today.
The dollar has continued to slide after a report showed that core inflation failed to meet estimates. Excluding food and energy costs, the core consumer confidence index rose 2.2% in September from a year earlier. While the reading failed to meet estimates of 2.3%, inflation remains near the Federal Reserve’s goal of 2.0%. Fed Fund Futures are pricing in a 76% that the Fed will raise interest rates by a quarter point for the fourth time this year in December.
The Euro popped higher on general dollar weakness overnight. The 0.5% rally comes after the common currency traded to its lowest level since mid-August yesterday. Fundamental data was light with only French and German CPI crossing the wire. The move higher could be profit taking near two-month lows. The ongoing Italian debt saga can continue to weigh on the common currency in the coming weeks.
The British pound is spiking higher this morning on hopes that a Brexit deal is closer to being reached. The Telegraph reported that the EU and the UK agreed in principle to a “backstop” plan which Prime Minister May could ask Brexit ministers to approve today. The plan is reported to avoid a hard border in Northern Ireland. The aim of the agreement appears to keep the U.K. within the customs union after Brexit while trade talks progress. We expect more details to trickle out throughout the day but in the near-term, the sterling is rallying.