Daily Market Update

Dovish ECB and British Politics Push Dollar Higher

October 05, 2017

The U.S. dollar was out of the spotlight overnight but was able to take advantage of developments abroad and rose across the board.


The U.S. dollar was out of the spotlight overnight but was able to take advantage of developments abroad and rose across the board. This morning’s economic docket did not disturb the dollar’s appreciation after weekly jobless claims registered in line with expectations. Later this morning, factory orders are expected to gain 1.0% in August after falling 3.3% in the month prior. Durable goods orders is another potential market mover and is due out at 10:00 a.m. EST.

In addition to economic data, there are a slew of Fed members slated to speak today. The Fed’s Powell, a member of the short-list to replace Yellen, will speak first. San Francisco Fed President John Williams and Philadelphia Fed President Patrick Harker will speak at 9:15 a.m. and 10:00 a.m., respectively. Kansas City Fed President Esther George will round out the Fed-speak this afternoon.

Tomorrow’s non-farm payroll print remains the biggest risk event on this week’s docket.



The Euro was mostly flat overnight but it losing modestly in early trading following the release of dovish minutes from the European Central Bank. The headline that struck traders read “Policy should be highly accommodative under all scenarios”, which throws some cold water on talks of future monetary tightening. ECB members also discussed the Euro’s appreciation throughout the year, although there was some disagreement on why it has occurred. The minutes do not change our medium-term thinking in regards to the EUR/USD strength but it was enough to push the currency lower this morning.

Lingering tensions in Catalonia continue weigh on the common currency. However, Spanish stocks were able to rise after a key government official disregarded the region’s independence bid.



The British pound is lower against all of its major counterparts this morning as more geopolitical headlines sank the currency. Prime Minster Theresa May attempted to give a speech at the Conservative party yesterday but a comedy of errors kept her from getting her message across. A prankster handed her a pink slip, part of the backdrop fell apart and the PM suffered a coughing attack. While none of this should affect policy, it was not a good look for a politician struggling to move her agenda forward. Speculation of her departure as Prime Minister has escalated again.

Overall, the sterling fell 0.6% and is trading at its weakest level in more than three weeks.

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