Daily Market Update

Sterling Rallies on GDP; Dollar Under Slight Pressure

September 09, 2019

The U.S. dollar was under slight pressure overnight as decent news abroad buoyed its rivals. The Bloomberg Dollar index is now at a 2-week low.

Overview

The main dollar driver over the next week and a half will be the build-up to the Federal Reserve’s meeting on September 18th.  It is widely expected the Fed will cut rates again, but the question becomes by how much?  It is our view, the central bank will cut rates by 25 basis points but a number of other cuts are priced in for later this year.

The Bank of Japan and the Swiss National bank will also meet next week and are expected to ease further as well.

The economic docket is fairly light to start the week but will pick up during the second half.  Consumer prices will cross the wire on Thursday morning. Retail sales will round out the week on Friday and be an important indicator to see how the American consumer is dealing with the trade war uncertainty.  Consumer spending accounts for nearly 70% of the U.S. economy.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

EUR

The Euro traded in familiar ranges against the greenback but still remains near its weakest levels.  Euro touched a 2017 low last week as traders ratcheted up expectations that the European Central Bank will add to its monetary easing and political threats remain in Italy.  The ECB will hold its meeting this Thursday and we expect the central bank to make deeper cuts to the already negative deposit rate.  New quantitative easing is also a possible option so expect the common currency to remain under pressure.  ECB President Mario Draghi will hold a press conference following the decision.

GBP

The British pound jumped on strong data.  Indeed, the sterling rallied nearly a percent after a report showed that the U.K. economy grew at the fastest pace in six months.

The pound found added relief after U.K. Prime Minister Boris Johnson took a slightly softer tone and emphasized he would prefer to get a deal done before the October 31st instead of a so-called “Hard Brexit.”  That said, Johnson continues to push for his “do or die” hardline plan to leave the EU.  Parliament will be suspended at the end of business today making a deal less likely.

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