Daily Market Update

Euro Rises after Solid PMI Figures; May’s Speech Main Event to Close Week

September 22, 2017

The U.S. Dollar lost some of its momentum yesterday and overnight as optimism over the Fed’s ability to hike cooled off a bit and data in the European theater boosted the shared currency further.

USD

The U.S. Dollar lost some of its momentum yesterday and overnight as optimism over the Fed’s ability to hike cooled off a bit and data in the European theater boosted the shared currency further. The full 1.0% the greenback gained after Wednesday’s FOMC announcement is disappearing quickly.

Safe-haven currencies are also gaining against the buck after some scary comments from North Korean officials that came along with a promise to test a hydrogen bomb over the pacific. Per the Bloomberg Dollar Spot Index, the USD is up just below half a percent this week.

There is hope the dollar has room to improve a bit with Markit PMI figures that will be released at 9:45AM. Expansion is expected and hopefully prior numbers are not revised downward since European data was stellar. Divergence in economic performance has been a major driver of dollar depreciation throughout the year and thus explains the lack of sustainability when the market tips in its favor.

 

EUR

The Euro is close to being up by 1.0% for the month of September thanks to the strong fundamentals it has gathered throughout the year. The good times continue as French and German production expanded significantly better than expected, which pushed the overall Eurozone composite PMI to 56.7 over the estimated 55.6. Growth has been consistent and many experts thank the work of the European Central Bank for the success that has been achieved.

It is possible the Euro has room to appreciate further next week as German general elections on Sunday are likely to confirm that Chancellor Angela Merkel will continue her reign of leadership for another five years. Anything that is not a victory for her and the Christian Democratic Union will be quite shocking, but thus far all political downside risks in Europe for the year have faded and led to the shared currency’s climb.

 

GBP

The Pound has blown up by over 5.0% this month on the basis of a concerned Bank of England that has promised to hike gradually in order to combat the high level of inflation. Nevertheless, Sterling’s Achilles heel of Brexit turmoil is once again a potentially damning reality for the currency.

Prime Minister Theresa May is scheduled to give a monumental speech in Florence addressing the issues regarding the divorce talks with what many expect is a clearer vision of what the U.K. intends to do in order to smooth things out with European Union lawmakers.

Talks thus far have failed to produce much in terms of what is important to the EU as it relates to a Brexit bill and immigration. Staying in the customs union might become a crucial necessity for Britain and this speech is an opportunity to make good with European leaders who believe the U.K. has acted as if they could “have their cake and eat it too,” as U.K. Foreign Minister Boris Johnson is known for describing Britain’s desire to leave while keeping a favorable trade agreement. The speech is likely to start a little after 9AM EST.

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