Dollar Set for 6th Daily Decline; S&P At Record High

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Dollar Set for 6th Daily Decline; S&P At Record High

AUGUST 19, 2020

The U.S. dollar declined modestly overnight, marking the sixth consecutive drop against its G10 counterparts.

Overview

The S&P 500 hit an all-time high yesterday, and the rally in equities looks to continue today, likely adding more selling pressure on the safe-haven greenback.

Analysts are warning that the rally in stock markets could be in jeopardy on geopolitical risks.  The Trump administration called off last weekend’s trade talks putting the threats of a new tariff war back on the table.  Trump has also asked colleges and universities to divest from Chinese holdings in their endowments in what could be foreshadowing more restrictions on China.

There does seem to be some bright signs coming from Washington, however.  Both Speaker Pelosi and Majority Leader Mitch McConnell have softened their rhetoric, increasing hopes a virus stimulus bill could be coming in the weeks ahead.  It has long been our opinion that both sides want a deal because they do not want to go home to their districts empty-handed months before an election.

This afternoon the Federal Reserve will release the minutes of their last FOMC decision.  We will be looking for a discussion about the recent uptick in inflation and what that would mean for policy in the longer-term. Expect the Fed to remain dovish overall and continue to give elected leaders warnings about how Covid-19 continues to be a weight around the economy’s neck.

What to Watch Today…

  • FOMC Minutes at 2 p.m.

Complete Economic Calendar can be found here.

EUR

The Euro touched its strongest level against the U.S. dollar in over two years yesterday as the greenback has weakened across the board.  The EUR/USD pair retreated from those highs during yesterday’s session, but the Euro remains poised to attempt to break higher in the coming days. EUR/USD is only slightly firmer this morning, but the modest gain represents six consecutive trading sessions of Euro gains. There is little in the way of fundamental data set for release in the Eurozone today, so expect the Euro to take its cues from the dollar and the prevailing risk sentiment.

GBP

The British pound touched its strongest level of the year against the U.S. dollar yesterday and continued that positive momentum most of the evening.  However, the sterling is under a bit of pressure this morning, perhaps a result of traders taking profits at year-to-date highs.

U.K. inflation data showed prices pressures accelerated at the fastest pace in four months in July.  Consumer prices climbed 1.0% in the month from a year earlier, doubling economists’ expectations.  While the sterling initially got a bump from the data, the pound quickly began to sell-off as market participants realized the print is unlikely to slow down the Bank of England’s stimulus.

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