The U.S. dollar is in recovery mode this morning, regaining losses from yesterday afternoon. The dollar started to sell-off yesterday afternoon after President Trump tweeted that he was disbanding two separate business councils as many CEOs chose to resign in recent days.
The U.S. dollar is in recovery mode this morning, regaining losses from yesterday afternoon. The dollar started to sell-off yesterday afternoon after President Trump tweeted that he was disbanding two separate business councils as many CEOs chose to resign in recent days. Analysts pointed to this as another arrow in the quiver of the argument that pro-dollar initiatives such as tax reform are less likely to be accomplished. The greenback continued its downward momentum after the Federal Reserve released their meeting minutes about thirty minutes after the Trump tweet. The minutes showed that Fed members remain split on when to reign in the Fed’s $4.5 trillion balance sheet but the September meeting remains on the table.
Developments abroad gave the scope for the greenback to rebound. This morning’s economic docket was decent enough to not get in the dollar’s way. Initial jobless claims were slightly lower than expected, adding to strong labor market narrative. The Philadelphia Fed also met expectations. Later this morning, consumer comfort will cross the wires but is unlikely to have a major effect. Consumer sentiment will round out the week. A summit of central bankers will take place in Jackson Hole, WY this weekend so expect the fallout from the meeting to be reflected in Monday’s rates.
The Euro ceded its gains from yesterday overnight as both the inflation and minutes from the European Central Bank meeting met expectations. The core inflation reading for the euro area confirmed an increase to 1.2% from 1.1% in June. The reading is still below the ECB’s target.
The common currency remained under pressure as the ECB minutes showed that some officials said ‘the appreciation in the euro to date could be seen in part as reflecting changes in relative fundamentals in the euro area vis-à-vis the rest of the world”, but “concerns were expressed about the risk of the exchange rate overshooting in the future.” While we do not see this as a verbal intervention into currency markets, it is worth noting that ECB members are keeping an eye on the Euro’s strength.
The British pound remains under recent pressure against the U.S. dollar and a strong economic docket was unable to boost the currency. U.K. retail sales beat expectations in July. However, a breakdown of the number shows that most of the sales were food sales. Every other category posted a decline, which is an ominous sign for the British economy.