Dollar Gains as Covid Shutdowns Sour Risk

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Dollar Gains as Covid Shutdowns Sour Risk

AUGUST 17, 2021

The U.S. dollar strengthened overnight as global stocks dropped for a second straight day.

Overview

Covid related shutdowns stretching from China to New Zealand to Europe are dampening the outlook for the global recovery.  Despite a likely dip when the market opens, the S&P closed at a record high yesterday.

Anticipation continues for next week’s Jackson Hole symposium where many market participants expect that the Federal Reserve will give guidance on the so-called “tapering” of monetary stimulus.  In the meantime, we will keep an eye on Jerome Powell’s town hall this afternoon for any clues or foreshadowing.

This biggest risk event on today’s calendar will be out shortly at 8:30 a.m.  Economists expect that July retail sales slowed 0.3% on a month-over-month basis.  Later, industrial and manufacturing production is due out at 9:15 a.m. and is expected to show a modest uptick.

What to Watch Today…

  • Retails Sales at 8:30 a.m.

View Economic Calendar

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NZD  

The New Zealand dollar fell over a percent after the New Zealand government announced a new, nationwide lockdown after the report of a single Covid-19 case.  The snap lockdown will begin at midnight and is expected to last three days.  The lockdown also calls into question whether the Reserve Bank of New Zealand will move ahead with its expected rate hike tomorrow.  Expect wild swings in NZD/USD over the next 36 hours.

The Australian dollar also took a dive as the Reserve Bank of Australia said it was ready to act further if lockdowns take a bigger economic toll.  AUD/USD is 0.7% lower at the time of writing to touch a nine-month low.

CAD  

The Canadian dollar continues to get beat up as the price of oil falls.  West Texas Intermediate has extended its decline. It is down nearly 1% today and is lower for the fourth consecutive day.  Economic data will likely take a backseat to the price of oil, but today’s docket includes housing starts.

The loonie is nearly 5% weaker than its yearly highs last seen at the beginning of June.

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