Daily Market Update

Dollar Rallies; Weakest Euro in Two-Months

October 24, 2018

The U.S. Dollar is flying this morning, especially against its European counterparts.

Overview

The Bloomberg dollar index hit fresh yearly highs, mostly on developments abroad. European manufacturing gauges disappointed, causing the Euro lead losses against the U.S. dollar. The Swedish krone lost over half a percent after Riksbank avoided a hawkish tone.

President Trump took another shot at the Federal Reserve. In an interview with the Wall Street Journal, the president suggested that he perhaps regrets appointing Fed Chairman Jay Powell. Trump has previously called the Fed his greatest threat.

At 9:45 a.m. Eastern, Markit PMI’s will cross the wire. A strong reading would show a widening differential between the U.S. and Europe and likely boost the dollar further. New Home sales are due out at 10 a.m. There are also four Fed speakers on today’s docket, along with the Fed’s Beige book at 2 p.m.

 

What to Watch Today…

  • US PMI at 9:45AM EST

The complete economic calendar can be found here.

 

EUR

The Euro sold-off following poor data and touched a two-month low against its American counterpart. Euro-area PMI registered at their worst levels since 2016. The composite Purchasing Managers’ Index for Germany, Europe’s largest economy, dropped to 52.7. German private sector activity slowed it its weakest since 2015.

The weak data will now put extra attention on European Central Bank President Mario Draghi’s press conference following tomorrow’s interest rate decision. The ECB is expected to prepare markets for the end of their asset purchase program in December, but expectations for further tightening have diminished somewhat following today’s data.

GBP

The Canadian dollar was flat overnight but expect renewed volatility later this morning following the Bank of Canada’s interest rate decision. All 23 economists surveyed by Bloomberg predict policy makers will boost their key rate by 25 basis points to 1.75%. The move would be the third increase this year and the fifth during the current cycle.

The loonie has also been under pressure in recent weeks as the price of oil has fallen drastically from its recent highs. WTI is 14% lower from its highs in early October.

 

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