Dollar Mixed; Sterling Pops on Brexit Deal Hopes

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Dollar Mixed; Sterling Pops on Brexit Deal Hopes

The U.S. dollar is mixed this morning, gaining modestly versus a handful of rivals but falling against the sterling.

Overview

Stock futures are relatively flat, which likely accounts for the lack of major movement for the dollar.   Bank earnings have proved to be a pleasant surprise but have not been able to boost risk sentiment due to a lack of progress on a much sought-after fiscal stimulus package.

President Trump tweeted the need to “go big or go home,” but his requests have been ignored thus far.  Senate Republicans are seeking a smaller package, which the Democrats have rejected out of hand.  Chances of a stimulus package before the election were already slim, and now they seem highly unlikely.
This morning’s producer inflation data echoed that of yesterday’s consumer print.  Inflation is slow and is showing no immediate signs of spiking higher.

There are many monetary policymakers speaking today, which will require some monitoring.  Mary Daly, Thomas Barkin, Richard Clarida, Robert Kaplan, and Randal Quareles will all take the microphone throughout the day.

What to Watch Today…

  • Half a dozen Fed speakers throughout the day

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October Monthly Outlook

EUR  

The Euro is mostly unchanged versus the U.S. dollar and the pair seems to have settled into a tight range this week.   European Central Bank Chief Economist Philip Lane is currently speaking but has yet to move the currency.  So far Mr. Lane has spoken on the low inflation environment in the E.U. and has not spoken about the strength of the Euro.  Lane famously talked down the Euro earlier this year.

The European economic docket was light today.  Eurozone industrial production rose 0.7% month over month in August, much slower than the 5% reading in July. Overall, yearly production is down 7.2%, which is mostly in line with expectations.

GBP  

GBP/USD traded in a full percent range overnight as Brexit headlines sparked a seesaw movement.  The sterling initially sank to a one-week low before rebounding sharply.  The net result is that the pound is up nearly half a percent versus the greenback since last night’s close.

While it seems impossible that the two sides will strike a deal by tomorrow’s deadline, the sterling got a boost on reports that Prime Minister Boris Johnson would not walk away and will continue talks past the deadline.  Johnson had previously said he would walk away on October 15th.  U.K. officials reportedly still believe a deal is possible but there has been little evidence of progress over the past two weeks.

EU Commission President von der Leyen, EU Council President Charles Michel, and PM Boris Johnson will hold a call this afternoon before the European Council meeting starts tomorrow morning.

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