Dollar Gets Pummeled on Good Data Abroad, Rising Commodity Prices

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Dollar Gets Pummeled on Good Data Abroad, Rising Commodity Prices

AUGUST 05, 2020

After holding its own during the first two trading days of the month, the dollar is getting pummeled again today.

The Bloomberg Dollar Spot Index declined by 0.5%. Reports of small progress on Capitol Hill has brightened the mood as Democrats and Republicans seem more likely than not to compromise on a virus aid package in the coming days.  Global equities and American futures are solidly in the green, giving traders a fresh reason to sell the safe-haven currency.

Early morning data was mixed.  ADP reported that they added 167K workers to private payrolls in July, which is a huge miss from the 1.2M expected by economists. However, June’s reading was upwardly revised by over 2 million jobs.  I am glad it is not my job to forecast labor data!  The private data may foreshadow surprising Non-farm payroll prints on Friday.  Earlier this morning, President Trump told Fox News there will be “another big job number on Friday.”  Traders are mulling whether the president is riffing or if he was speaking on privileged data.

Trump also contended that the U.S. is heading toward a strong V-shaped recovery despite recent data warning of a longer, more drawn out rebound.  We will get more evidence at 9:45 this morning when Markit will release their Service and Composite PMI readings.

What to Watch Today…

  • Service and Composite PMI at 9:45 a.m.

Complete Economic Calendar can be found here.

EUR

The Euro pushed higher following strong economic data.  The composite purchasing managers’ index rose to 54.8, its best reading in two years, with advances in both services and manufacturing.  Prints above 50 show an expansion. Orders also increased for the first time in five months.  The data was not all rosy, as IHS Markit reported that European companies made further cuts to their workforce in July.

The U.K. also released stellar PMI data, allowing the sterling to gain an additional half a percent against its American rival.

AUD

Commodity-backed currencies were the biggest winners overnight, led by the Norwegian krone and Australia’s dollar.  Gold railed to its highest price on record and oil prices rose to the highest level in five months on depleted inventories. West Texas Intermediate crude surged 4.4%.

The Norwegian krone gained 1% and pushed to levels last seen in January.  The Aussie and New Zealand dollars gained 0.7% and 0.3%, respectively.

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