The U.S. Dollar remained mostly unchanged overnight after slightly falling throughout the yesterday afternoon following President Trump’s speech to the United Nations General Assembly. Without much data to rely on, the greenback succumbed to faith in European as well as emerging markets in addition to new record highs across equity indexes.
Today’s Fed announcement could produce a surprise spike for the dollar in the case that officials sound a more positive tune for the economic outlook and if a hawkish stance on shedding their book off quantitative easing purchases is displayed. A press conference will follow the meeting.
Global aid is geared up to help Mexico after the North American neighbor experienced a devastating earthquake. Rescue efforts are ongoing and the casualty count keeps on rising. Thus far, the Peso and the country have shown resilience. Other natural disasters may be on the way for the already battered Caribbean in the form of hurricanes. As a result, oil and other commodity prices are on the rise, boosting the Canadian, Aussie, and Kiwi dollars alike.
The Euro stayed strong as its equity markets rallied and sustained all its gains following the release of better-than-expected Producer Price Index data in Germany. Thus far, the European Central Bank is not looking to tighten monetary policy as its QE program comes to and in December. However, some economists within the bank are worried that the Euro may be on an undesired winning streak and perhaps this could lead to a wind down of speculative talk about the chances of any interest rate increases.
Current policy, as accommodative as it may be, is indeed working and we do not see the ECB acting in a contractionary way until the second half of next year. Euro levels may increase gradually down the line, but they have merit at the moment and further gains may be limited.
Sterling climbed back after news of stellar numbers in Retail Sales, which increased by 1.0%, exceeding the estimated 0.2% growth. Despite the good data, concern is growing over how workers are getting by as the level of debt has increased five times faster than the level of wage growth.
In times of uncertainty, companies are considering leaving the U.K., which threatens job stability and combined with overuse of credit, could prove to be a recipe for economic disaster. The Pound is up on the prospects of higher interest rates, but this trend could end if the Bank of England starts hesitating on hiking sooner rather than later.