The U.S. Dollar is trading dead flat ahead of economic indicators and some speeches by Fed officials this morning. Overnight trading sessions represented recovery for commodity as well as equity markets, with Asian stock indexes like the Hang Seng bouncing back and European ones such as Euro Stoxx 50 up by over 1.0%. Oil prices are slightly on the rise since the OPEC talks are taking place in Algiers. Although Saudi Arabia and Iran will not make any output cut accords today, they both expressed willingness for the November meeting in Vienna.
Indeed, Durable Goods registered at 0.0% and excluding transportation expenses, the actual contraction came in better than expected at (-0.4%) over estimated (-0.5%). Consumer Sentiment yesterday registered at its highest level in seven years. Fed Chairwoman Janet Yellen will speak in front of the House Financial Services Committee at 10AM while speeches from Fed governors Charles Evans and James Bullard are also slated for later.
Evans did not vote to hike in September, but has strongly argued in favor of increasing the rate when he’s had the opportunity this year. Good data could lead to further hawkish talk.
The Pound resisted downward pressure thus far even after dovish commentary from Bank of England Deputy Governor Minouche Shafik. The official explained during a Bloomberg Summit that more easing will be needed for the UK to counteract the negative impact of the Brexit. GBP is now on its longest streak of quarterly losses since 1984.
Consumer Confidence improved a little post-referendum, but property values, investment, and potential for major capital flight as EU negotiations evolve are cause for concern. More importantly, the calm after the introduction of Theresa May as Prime Minister ended with the show of indecisiveness from members of her cabinet about the specifics of future separation talks. BOE will not meet again until November 3rd.
The Euro fell yesterday, but recouped its losses despite mounting troubles with banks and auto manufacturers. However, the common currency may start dropping as market participants take notice of the downside risks to the German economy, the only one dragging the rest of the trading bloc through a very anemic recovery.
ECB’s Mario Draghi will be addressing his biggest critics today, the lower house of German parliament to answer questions regarding his often scrutinized policies.
Although Deutsche Bank calmed fears by stating that they will not need to raise new capital and are planning to sell their British insurance business for almost EUR 1.0 billion, the bank’s problems come at a time of immense pressure for a German nation that’s anchored the push for growth and faces intense internal opposition. Small businesses dependent on the health of Deutsche and Volkswagen will certainly be affected.