Daily Market Update

Buck Crashes Going into September, 2-year Low

September 01, 2020

This morning the U.S. Dollar hit a fresh two-year low according to the Bloomberg Dollar Spot Index as economists foresee a much harder recovery for the U.S. than other regions to close the year.

Overview

Naturally, the price of commodities and gold continue to climb as many funds have indicated a bearish outlook. Meanwhile, tech is looking forward to new iPhone units, the potential for TikTok to be purchased by Wal-Mart and Microsoft, and equities worldwide remain buoyant with exchanges such as the S&P going five months in a row with gains.

In a day where we will keep an eye on just how much the buck can sink to its peers, we will get a look at August Purchasing Managers Index figures at 9:45 AM as well as the ISM Manufacturing and Construction data at 10 AM.

Economists as well as investors are still digesting and coming to terms with the announcement by the Fed’s Chairman Jerome Powell that the Fed would “let the economy run hotter.” Without furthering confusion, all the Fed is doing from now on is the opposite of how they acted after 2014 when it looked like the worst of the 2008 financial crisis was behind us. Instead of fearing spikes to inflations that can get out of control, the Fed will remain vigilant of a 2.0% rate, but will not get in the way of improvements to labor that are due to a low-interest financial environment.

We think the first reaction is what we are witnessing: a lack of faith in taking is USD positions and debt knowing the yield is so low and for years to come.

 

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

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EUR

The Euro starts September looking dominant as the buck ended a five-month streak of losses due to changes to the Fed’s approach as well as failure to stimulate the economy with a robust federal fiscal plan. COVID-19 infections have indeed gone up in the major member nations, yet the initial success of quarantine restrictions have made it possible for society to not go back to halting activity in these regions.

Additionally, economic indicators continue to show improvement as Italian unemployment climbed a bit indicating people are again seeking jobs while a manufacturing gauge went back into expansionary territory much more than expected.  The momentum is certainly on the shared currency’s side.

 

GBP

The British Pound sky-rocketed after a major sign that perhaps the hopes for a V-shaped economic recovery are not foolish. A measure of new applications to finance a vehicle by Experian showed an increase of about 24.0%. We remain skeptical on the prospects for further GBP strengthening as Brexit woes will hit hard as negotiations likely come to a close without a deal before the October deadline for something to be on the table. On the September Currency Outlook, we highlight these concerns

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