Dollar Gains After Falling For Three Days

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Dollar Gains After Falling For Three Days

OCTOBER 05, 2021

After taking heavy losses yesterday, U.S. equity futures show American shares will rebound at the open.

Overview

The uptick in futures comes as investors appear to be rushing towards energy stocks.  Global markets, in general, are seeing increased volatility and vulnerability as an energy crisis continues to worsen.  Extreme weather, rising demand for energy, and supply chain issues are to blame.  The safe-haven greenback has been a major beneficiary of the uncertain risk environment.  However, with the debt ceiling looming in the United States, the dollar is having trouble extending gains from the end of September.  Indeed, the greenback sold off for three consecutive days before ticking modestly higher overnight.

There is no tier 1 data on the early morning economic docket today so we will have to wait until mid-morning for a possible market-moving event.  The final reading of September PMIs will cross the wire at 9:45 a.m., followed by ISM Services at 10 a.m.

There is only one Fed speaker on today’s docket, but the event is unlikely to move markets.  The Fed’s Quarles will discuss the transition of Libor at 1:35 pm.

What to Watch Today…

  • Services ISM at 10 a.m.

View Economic Calendar

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CAD   

The Canadian dollar was unable to extend its recent gains against the U.S. dollar overnight even as the price of oil continued its march higher.  The loonie had gained for three consecutive days before trading in a flat range overnight.  The price of West Texas Intermediate climbed over 1.0% and touched its highest level since 2014.  As discussed above, the global energy crisis is intensifying.  If the trend continues, expect commodity-based currencies to benefit in the fourth quarter.

AUD   

The Australian dollar experienced a sharp sell-off overnight but has since been able to recoup its losses.  As expected, the Reserve Bank of Australia kept its key interest rate unchanged. The move was predicted by all the economists surveyed by Bloomberg.   The RBA also stuck to their 2024 rate hike schedule, which surprised some who thought the central bank may pivot to a more hawkish posture.  Regardless, the initial sell-off was short-lived and AUD/USD is back to ranges seen during yesterday’s session.

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