Daily Market Update

Dollar Seesaws Again; Markets Sour; Inflation Ticks Higher

August 13, 2019

Much like yesterday, the U.S. Dollar advanced modestly overnight before reversing course and giving back its gains.

Overview

Political unrest abroad is adding to the risk-off sentiment that is already strong as the China-US trade war continues.  Protestors have shut down the airport in Hong Kong for a second day and Argentine stocks fell 48% yesterday following election results, further souring the risk mood.

Global equity indexes are solidly red again today as signs of a global slowdown mount.  The yield on US 30-year treasury bonds fell to an all-time low yesterday as investors flock to safety.

This morning’s economic docket has not been able to materially benefit the dollar despite an upbeat CPI reading.  Core consumer prices, which exclude food and energy, rose 0.3% from the prior month and 2.2% on a year over year basis.  Inflation has remained low and allowed the Fed to reverse course and cut rates this summer.  If inflation does begin to trend higher, it would make it more difficult for the central bank to justify a series of rate cuts.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

EUR

This morning’s EUR/USD chart mirrors yesterday’s move.  The Euro initially lost overnight as talks of an Italian no-confidence vote bled into today but has risen in early trading.  The Italian political uncertainty should be a high priority for traders, and it is.  But a slew of negative political and economic events across the globe have taken a bit of the spotlight.

The Euro is slightly higher even after the ZEW Index showed that the German economic outlook worsened for the fourth month.

GBP

The pound sterling shrugged off an earlier fall after a report showed that U.K. wage data beat estimates.  Indeed, wages rose at their fastest pace in 11 years in the three months through June.  Basic earnings growth is now close to 4.0%, considerably higher than inflation.  The total number of people in work rose by 115K making the employment rate a record high.   The report was not all rosy as productivity slumped from a year earlier, its fourth straight decline.

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