The U.S. dollar remains under pressure after suffering heavy losses on Friday. Fed President Janet Yellen did little to stop the dollar’s fall as she chose to stick to defending the government’s regulatory response to the market crash of 2007/2008 instead of addressing inflation expectations.
The U.S. dollar remains under pressure after suffering heavy losses on Friday. Fed President Janet Yellen did little to stop the dollar’s fall as she chose to stick to defending the government’s regulatory response to the market crash of 2007/2008 instead of addressing inflation expectations. Odds for a December interest rate hike had fallen throughout the week and remained low after her speech. The Bloomberg Spot Dollar Index is at a two-year low.
As the summer trading season comes to an end later this week, the dollar will have to rely on a heavy week of economic data to possibly stage a comeback. Later this morning, the Dallas Fed manufacturing index will cross the wires and consumer confidence is slated for tomorrow. Revised second quarter GDP and ADP private payrolls are scheduled for Wednesday, followed by Chicago PMI on Thursday. The largest risk event is Friday’s Non-farm payrolls print for August. Economists are expecting the U.S. economy added 180K jobs in August, after adding 209K in July. An upward revision of GDP and a strong jobs numbers may put a December interest rate back on the table and boost the dollar.
The Euro jumped to its strongest level since January 2015 against the U.S. dollar late Friday. European Central Bank President Mario Draghi did not talk down the strengthening currency, giving Euro bulls to the greenlight to continue to drive up the currency. The central bank head did not announce a policy shift or plans to reduce the bank’s bond-purchases but traders were looking for an excuse to sell dollars and buy Euro and Draghi’s speech was that opportunity. The EUR/USD pair will once again struggle to set a new, higher range but the Euro looks to be in a strong position heading into the autumn.
Markets in the U.K. are closed for the August banking holiday today, but that has not stopped sterling volatility. The third round of Brexit negotiations is expected to begin later today. European Union negotiators are pressing the U.K. government solidifying its position. Prime Minister Theresa May’s government wants to leave the since market and customs union in March 2019, establishing a transition period of up to three years to allow both sides to adapt. But that position is not being challenged domestically by the Labour party who announced its desire to stay in the single market for a long transition period. The geopolitical turmoil should keep the sterling low and unable to fully capitalize on a generally weak U.S. dollar.