Daily Market Update

Dollar closes August higher with inflation

August 30, 2019

The U.S. Dollar is trending higher this morning resulting from positive data in the form of inflationary growth and consumption gauges.

Overview

Personal Income this morning failed to reach its 0.3% target coming in at 0.1%, but consumers spent more than expected in July with the 0.5% estimate beat at 0.6%. Meanwhile, Personal Consumption Expenditures Core Deflator, a measure closely monitored by the Fed, improved as expected by 0.2% last month keeping the yearly average at 1.6%. This still falls short of the 2.0% inflation target and could add to arguments for further cuts to interest rates.

We get Consumer Sentiment at 10 AM to close out August. The up and down nature of this volatile past month led to some gains for the buck as it improved by just 0.4% overall, according to the Bloomberg Dollar Spot Index. Emerging Market currencies and those very dependent on trade like Scandinavian NOK and Oceanic AUD and NZD. Mexican Peso was one of the biggest losers, falling by over 4.0%. We think that trade war woes combined with decent domestic data for the U.S. will keep the greenback powerful, but all is subject to change at any given moment and rather quickly.

 

What to Watch Today…

  • University of Michigan Wolverines Consumer Sentiment 10AM

Complete Economic Calendar can be found here.

 

EUR

The Euro continued losing ground, suffering a half percent weakening as a whole for the week based on poor inflationary numbers across the Atlantic. While U.S. figures pointed to some consistency, Core Consumer Price Index Year-over-year average fell from 1.0% to 0.9%. There is hope as always if there is hesitation from the European Central Bank to exercise the use of a stimulus package that would include easing on lending rates as well as quantitative easing, the intervention in the sovereign bond market.

Its return is not welcome by all and many financial voices in the continent are explicitly saying that no aid is needed at this time. Jens Weidmann, president of Germany’s Bundesbank, said it would “wrong for us to act for action’s sake.” Any hawkishness from the ECB could mean a return to Euro strengthening to close the year.

GBP

Pound Sterling happened to be just a little over 0.2% higher than where it started this week after a major swing caused by the turbulent political times emanating from the struggle to find a Brexit solution. While Parliament is set aside, we continue to study what this means to the process of negotiations as well as the future of the United Kingdom since reaction has been strong to the move by Prime Minister Boris Johnson.

At this moment, we feel elections of some kind may be afoot as pressure builds before the October 31st deadline. A lot is up in the air and we will monitor daily and maintain our outlook on stronger Pound for later.

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