Daily Market Update

Dollar Stuck Ahead of Jackson Hole; Volume Low

August 24, 2017

Once again, the greenback stayed range-bound ahead of the Jackson Hole symposium and some first tier economic slated for later today and tomorrow.  Volume traded among G10 currencies has remained very low which is expected for late August.

USD

Once again, the greenback stayed range-bound ahead of the Jackson Hole symposium and some first tier economic slated for later today and tomorrow.  Volume traded among G10 currencies has remained very low which is expected for late August.

The much-anticipated gathering of central bankers in Wyoming starts today, but the headline speakers are scheduled for tomorrow as both Fed President Janet Yellen and European Central Bank head Mario Draghi will both give speeches.  Expect traders to mostly focus on the comments surrounding their inflationary outlooks.  Global inflation has remained low even as job markets have tightened and growth has been steady.

As the August congressional recess comes to an end, the debt-ceiling debate will also start to come in to focus.  The borrowing limit must be raised by September 29th or the U.S. would run out of money and likely have to shut down parts of the government.  In what has become more of a public feud, the President and Congressional leaders have seemingly different ideas on what needs to be done.  Senate Majority Leader Mitch McConnell has said there is “zero chance” Congress will not raise the debt ceiling in time.  But earlier this week, the President threatened a shutdown if he does not get funding (from the US) to build a wall on our Southern border.  Democrats have vowed to not back a bill that would include money for a border wall, creating small needle for McConnell to thread.  Failure to raise the debt-ceiling will all but certainly have a negative effect on the greenback. 

Later this morning, existing home sales will be released and follows a disappointing new home sales print that was released yesterday.  Tomorrow, durable goods orders are due out and will give investors an indication of business’s long-term sentiment.

 

EUR

The Euro was unmoved overnight, essentially ignoring hawkish comments from policy makers.  ECB policy maker Ardo Hansoon downplayed worries that the stronger Euro is having a negative effect on the EU economy.  Bundesbank President Weidmann told German media that the Euro’s summer rally is “an expression of relative economic strength.”  These two comments will be quickly forgotten ahead of Mario Draghi’s speech tomorrow at Jackson Hole.  We will be listening closely for a clue as to what the central bank might do with their quantitative easing policy in September. Until his speech, we expect the EUR/USD pair to trade in a tight range.

 

GBP

The British pound was able to lift-off its two-month low against the U.S. dollar even as economic data was less than dazzling.  The second reading of second quarter GDP matched estimates.  Growth over the quarter was 0.3% and year over year registered at 1.7%.  Growth over the last two quarters has been the weakest since 2012 when the economy was contracting.  A further breakdown of the print showed that U.K. consumer spending barely grew in the second quarter, showing the continued woes for the economy.  The 0.1% increase in household spending was the weakest since 2014.

 

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