The U.S. Dollar weakened yesterday and further overnight after revelations of the serious damage the U.S. economy has taken and could continue to withstand.
After Gross Domestic Product figures yesterday showed the extent of America’s contraction, Personal Income and Spending out of June failed to meet expectations and with wages falling far more than double the forecast. Per the Bloomberg Dollar Spot Index, the bad times for the buck mean a fresh new two-year low.
Reality is finally setting in that any comeback to economic prosperity will need a lot of government help, Fed relief, as well as private investment. The buck has played the role of safe-haven is certainly fading as chaos and crises do not push a flight to safety the way we have understood it for years. Instability and no momentum is likely going to maintain downward pressure on the dollar for what remains of the Summer.
We have the University of Michigan Consumer Confidence survey at 10M. Markets will digest earnings from two large infrastructure companies in Caterpillar and Exxon today. Lack of excitement in the global economy is keeping oil prices down, thus helping the buck have slight gains against neighboring CAD and MXN.
What to Watch Today…
- No major events scheduled for today
Complete Economic Calendar can be found here.
The Euro is now trading at its strongest level since May 15th, 2018. After GDP numbers showed expected contractions, individually, nations of the bloc fared much better off than the U.S. As of now, we understand that fiscal integration is a major factor in the rise of Euro, but what may dictate its direction from now on will be consistency in data. If indeed the global economy can somehow function with the struggling U.S., the benefit of prosperity may not mean a rise in U.S.-denominated assets. The interesting turning point for Euro, which many strongly advocated should be abolished post the Greek crisis and predicted its demise to parity against the dollar the past ten years.
Pound Sterling is trading at its best point since the start of March. Nationwide Housing numbers for July showed an unexpected expansion when a contraction was the estimate. To deal with the pandemic with caution, largely populated areas of the U.K. are going back to some measured restrictions since the virus is reappearing. We did not get much out of the two parties negotiating a trade deal, but once that item is back on focus, GBP flows could be threatened.