The U.S. Dollar is fairing a bit better against most of its major counterparts as market participants eagerly await the European Central Bank meeting’s decision tomorrow, the main event before the continent goes on holiday mode. A surprise in the Housing Starts and Building Permits data from this morning are also aiding the dollar in its minor, yet crucial recovery after falling dramatically yesterday and all throughout July.
Housing Starts grew by 8.3% over the expected 6.2% while Building Permits rose by a stellar 7.4%, beating estimates of just 2.8%. The strong expansions contrast with prior monthly contractions.
With markets relatively quiet and no major data, we will once again look for headlines to see if they serve as a driver for any type of movement. Although it didn’t affect the North American currencies much, NAFTA revisions have been made to update certain industry guidelines and show the U.S. wants to export more to cut the trade deficit. In oil news, the glut continues and OPEC continues its struggle with pushing for production cuts in the midst of an effort in China to curtail its use of fossil fuels.
The Euro stopped its winning streak after the U.S finally got a glimpse of positive data in what has been a rough month for the buck. The ECB starts its meeting today and there is speculation that officials are working on their options to start shedding some of the quantitative easing in place.
After some years of high unemployment, little to no inflation and political risks, the Euro-bloc has recovered thanks to the central bank’s efforts, but the economy is now ready to be relieved from the bank’s intervention. The QE monthly injection of €60 billion is set to end completely in December. We shall see if there is any mention of increasing interest rates eventually, which could cause another Euro spike.
The Pound is starting to pivot downward following yesterday’s release of underwhelming inflationary figures. The indicators, such as CPI, slowed down and now the Bank of England does not feel the pressure to hike interest rates in order to fend off the potential of prices going up too high.
Indeed, it looks like BOE Governor Mark Carney was right in stating that the inflationary build-up has been the result of the rapid depreciation of the “quid” post-Brexit referendum and that it should be overlooked for now. Brexit-wise, it seems like meetings went well, with both parties discussing details in regards to maintaining borders with Ireland as open as possible and making sure EU citizens in the UK are valued.