Daily Market Update

European PMIs Impress; Dollar Falls Slightly

October 04, 2017

The U.S. dollar came under pressure across the board overnight, retracing much of its gains from the week prior. The U.S. dollar did not see much action yesterday as an empty economic docket led traders to look to developments abroad to move currency markets.

USD

The U.S. dollar came under pressure across the board overnight, retracing much of its gains from the week prior. The U.S. dollar did not see much action yesterday as an empty economic docket led traders to look to developments abroad to move currency markets. However, the week will pick up starting with this morning’s release of private payrolls. ADP reported that private companies created 135K jobs in the month of September, exactly meeting already-low expectations. The previous month’s number was revised slightly lower which put the greenback under modest pressure. Friday’s non-farm payrolls print remains that biggest risk event of the week.

This afternoon Fed Chair Janet Yellen will be speaking in St. Louis. Her speech is not expected to dive deep into policy, but market participants will continue to pay special attention.

In addition, the market is starting to digest the short-list of candidates that President Trump is considering to replace Fed Chief Janet Yellen when her term ends early next year. That list includes a re-nomination of Yellen, current Federal Reserve Bank of Minneapolis President Neel Kashkari and Jerome Powell who was been a member of the Board of Governors for five years. Another name on the short list, ex-board member Kevin Warsh has criticized the central bank for trying to do too much with monetary policy, so his nomination would mark a big shift within the central bank.

 

EUR

The Euro is attempting to make a comeback after reaching a 6-week low against the U.S. dollar earlier this week. The common currency advanced 0.3% against the U.S. dollar as news surrounding the Catalonian referendum took a backseat to positive economic data. Services and Composite PMIs both climbed slightly back towards multi-year highs giving the common currency some respite.

 

GBP

The British pound also benefited from PMI data overnight. The service sector registered PMI of 53.6%, indicating expansion. The positive print was a welcome sight after a slew of poor data has battered the sterling over recent trading sessions. Most recently, construction data showed the worst contraction since 2016.

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