Daily Market Update

Dollar Unable to Rebound From Yesterday’s Losses

September 06, 2017

The U.S. dollar is mostly unchanged from yesterday. The greenback was under pressure after two different Fed members expressed caution and downplayed the need to increase borrowing costs by the end of the year.

USD

The U.S. dollar is mostly unchanged from yesterday. The greenback was under pressure after two different Fed members expressed caution and downplayed the need to increase borrowing costs by the end of the year. Voting member Lael Brainard focused on the low inflationary environment, while Neel Kashkari held a generally cautious tone.

This morning’s economic data includes Markit Service data and ISM non-manufacturing. While the data is considered first-tier, traders may decide to focus on external events over the next few trading sessions. The aftermath of Hurricane Harvey and the pending threat of Hurricane Irma coupled with the threats from North Korea have sent U.S. equities lower and the greenback has taken notice. In addition, Congress must come to an agreement to raise the debt-ceiling by the end of the month. We will be monitoring the political progress as some believe any debt-ceiling bill might also include considerations for the border wall or funding for the victims of Hurricane Harvey. Congress now also faces another challenge of trying to pass a law to replace “DACA.”

 

EUR

The Euro was able to hold onto its gains from yesterday and extend them modestly even on the back of lackluster economic data. German factory orders fell 0.7% in July and June’s print was negatively revised. German construction PMI also reflected slower growth overall. Focus is now squarely on Thursday’s European Central Bank decision. Recent comments from ECB officials have indicated the central bank might not be ready to being tapering its bond purchases. However, expect cautious trading ahead of the decision as a taper announcement is not out of the question.

 

GBP

The British pound gained during yesterday’s session but has been unable to extend its momentum as “Brexit” has reappeared in the headlines. Bloomberg News is calling it a “double blow” as the top European Union, Sabine Weyand, told German lawmakers that she’s skeptical officials will begin discussing a trade deal in October. Another report, said that the opposition Labour party is seeking to block Prime Minister May’s plan for a post-Brexit legal regime in London. The Guardian newspaper also received a leaked copy of May’s immigration plan, which would end the free movement of workers on the day Britain leaves the EU and impose restrictions on all but highly skilled workers from the region. In short, Brexit is proving to be a quagmire that is sure to keep the sterling under pressure for the foreseeable future.

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