Dollar Slips, Still on Track for Fourth Weekly Rally
OCTOBER 01, 2021
After a ferocious rally to end the third quarter, the U.S. dollar is slightly on the back foot this morning.
Nevertheless, the Bloomberg Dolla Spot Index is set for its fourth straight weekly advance. With the beginning of a new quarter, today’s moves are likely just a consolidation of the week’s exaggerated moves. The safe haven is also finding modest support as risk sentiment improves.
While the dollar could have a quiet day of trying to establish new, stronger ranges, there is a slew of data that may cause more volatility. U.S. August personal spending rose 0.8% month over month, which is slightly above expectations. Incomes also rose 0.2%, coming right in line with expectations.
A separate report showed that inflation continues to tick higher. The PCE Deflator, the Fed’s favorite inflation gauge, showed prices increased 4.3% on a year-over-year basis. The Core deflator also showed an uptick will all the readings coming in slightly higher than expected.
Markit PMI and University of Michigan consumer sentiment and ISM manufacturing are all due out at 10 a.m. Later, the Fed’s Harker and Mester are slated to speak.
What to Watch Today…
- Markit PMI and ISM Manufacturing
IT’S A ‘THREE-PEAT’ | Top MXN Forecaster for Last 3 Quarters
The Euro is slightly firmer this morning as the U.S. dollar is generally weakening today. The Euro lost 2% of its value over the course of September and hit year-to-date lows earlier this week. As our partners at Monex Europe point out, the Euro’s crash came even after the European Central Bank indicated it would start to reduce its asset purchases this quarter. Data released in the Eurozone this morning will provide support for the ECB’s hawkish shift. Inflation ticked up to 3.4% in the euro area, a 13-year high. The core reading also accelerated 1.9%.
EUR/USD continues to flirt with a major technical and psychological level. If the greenback is unable to make a strong push, the Euro will likely see a modest bounce next week.
The Canadian dollar is up across the board even as the recent rally in the price of oil stalled. Expect to see some movement in USD/CAD this morning as both the U.S. and Canada released tier 1 data at the same time. Canadian GDP for July fell 0.1% but beat estimates of a 0.2% contraction. The flash reading for August GDP shows an improvement and growth of 0.7% on a month-over-month basis. As expected, USD/CAD is whipsawing in a three-tenths range in the minutes following the data.