Dollar Slightly Lower, Giving Back Yesterday’s Late Gains

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Dollar Slightly Lower, Giving Back Yesterday’s Late Gains

AUGUST 12, 2020

Currency and equity markets have seen heightened volatility over the past 24 hours.

Overview

The U.S. dollar recouped earlier losses from yesterday in the afternoon session after Senate Majority Leader Mitch McConnell threw cold water on hopes a new stimulus deal is on the horizon. The comment caused equity markets to erase gains and gave the greenback a boost.  However, stock futures are positive again this morning, and the dollar is sliding. A see-saw, indeed.

Overall, the Dollar Index is down 0.2% this morning, which would represent the first daily loss in three.

This morning’s fundamental data mirrored that of yesterday with another indicator showing an uptick in inflation, albeit well below the Fed’s target.  Headline and core consumer price indexes were all slightly higher than forecast, similar to yesterday’s PPI print. Despite the increase in inflation pressures, it is unlikely to move monetary policy decisions in the near-term.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

NZD

The New Zealand dollar was the biggest mover against the U.S. dollar, falling as much as 0.8%.  In a dovish move, the Reserve Bank of New Zealand boosted its Large Scale Asset Program to 100 billion NZD.  The central bank also maintained that negative interest rates are in “active preparation.”

Negative COVID headlines added pressure on the Kiwi.  After over 100 days without a report of community transmission, the nation reported its first case.  As a result, authorities have moved to re-lockdown Auckland, New Zealand’s largest city.

GBP

The British pound is under pressure this morning following a mixed GDP report.  The U.K. economy shrank at a record 20.4% in the second quarter, about double the contraction in the United States and the worst contraction recorded in Europe since the pandemic. The reason that sterling has not fallen like a stone was a breakdown of the report that showed stronger-than-expected growth data in June, the last month of the quarter.  June’s growth was 8.7%, causing traders to price in a more robust recovery than previously expected.

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