The U.S. dollar as a whole was mostly unchanged but did experience significant gains against the Aussie and New Zealand dollars while suffering more losses versus the yen.
Central banks dominated headlines overnight with banks in New Zealand, India, and Thailand all cutting rates to spur their economies in the face of a global slowdown.
Federal Reserve Bank of St. Louis James Bullard lent his voice to the growing chorus of policymakers to warn the trade war is having a negative effect on the U.S. and global economy while speaking in yesterday Washington. Bullard said that trade uncertainty will be the new normal in the near-term and held his view that the Fed will need to cut rates at least one more time in 2019. Fed Futures show traders are pricing in a 100% chance of a September rate cut and a 50% chance of three rate cuts before the end of the year.
The domestic economic docket is light today so traders will take their cues from developments abroad or President Trump’s Twitter account.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
EUR/USD held a tight range overnight despite more worrying signs from the Eurozone’s largest economy. German industrial production fell the most in nearly a decade. Production fell 5.2% from the previous year. While running the risk of sounding like a broken record, increased trade tensions are starting to manifest in the real economy and this is another example.
The New Zealand dollar dropped over 2.0% overnight after the Reserve Bank of New Zealand surprised markets with a half a percent cut. Market participants were widely expecting a 25 basis point cut. The RBNZ said it was trying to preempt the ill effects of slowing global growth and also fingered the trade war for its negative outlook. The Kiwi recovered some of its losses but still remains near 1.5% weaker this morning.
The Australian dollar also declined and briefly touched a ten-year low as traders began to price in additional cuts by the Reserve Bank of Australia. Traders are pricing in a 70% chance of a September cut. Australia has also weakened as trade tensions between China and the U.S. have intensified over the last week.