The U.S. Dollar suffered losses yesterday and overnight based on mixed markets and expectations of recovery in the U.S. labor sector as well as the overall economy.
Overview
Republicans and Democrats in the Senate are said to have enough votes to pass a slimmed-down rescue/stimulus package that can assist in mounting a comeback. Additionally, there are reports the White House is considering further executive orders redeploying unused billions from the CARES Act.
The negative sentiment from Tuesday and Wednesday morning has certainly found a challenge as equities regained whatever they had lost with somewhat renewed faith in the tech industry, which has sky-rocketed in valuations since the pandemic started. European and Japanese markets struggled to eek a return, yet other Asian markets lost after initially being up. The European Central Bank’s decision to maintain the course as is without changes ailed to stimulate exchanges that way as its pandemic bond-buying program was not increased and stayed put at €1.3 trillion.
We are gauging reaction now from the release of August Producers’ Price Index and Jobless Claims figures, but thus far no major changes. Buck has experienced some depreciation across the board, except against Sterling. The numbers were positive for PPI which expanded 0.3% instead of just 0.2% expected. Initial Jobless Claims finally came in at less than 1MM, 884K exactly close to the estimated 850K. On the other hand, Continuing Claims did increase a bit from 1.29MM to 1.30MM. Perhaps news of a package later in addition to the data can spare the buck some pain as the tide has turned against it based on a renewed sense of optimism.
What to Watch Today…
- No major events scheduled for today
Complete Economic Calendar can be found here.
EUR
The Euro is on the climb once again following the ECBs announcement to keep all action intact as well as interest rates. The Main Refinancing rate stayed at 0.0% and the deposit rate at (-0.5%) to incentivize banks not to maintain funds in reserves and keep lending.
Indeed, the ECB is just maintaining an accommodative financial environment as expected and ECB Chairwoman Christine Lagarde said there should not be any overreaction to exchange rates and its flows towards strengthening.
GBP
The British Pound is the one exception among the majors, losing to the buck as the Brexit situation and lack of trade agreement at this moment is quite worrisome. Experts from historians to economists, from business leaders to those in the legal profession, are all concerned that by essentially tearing up an already-agreed-upon treaty the U.K. is at the risk of becoming a “rogue” state.
Hard to imagine that a former world empire would face legal repercussion after years of attempting to separate from the EU. The collapse of Sterling is set to continue.
Pressure will increase on policymakers and the sterling as we approach the mid-October deadline for a deal. While a deal may be had in the end, expect sterling gains to be capped as the Brexit cloud looms.
Also, the U.K. is reported to be adding tighter restrictions on home gatherings as COVID cases begin to surge again.
