Dollar Softens as Equities Continue to Rise
The U.S. dollar is weaker this morning, continuing its modest declines since Friday.
The safe-haven greenback had been unable to extend gains seen earlier in the month as risk appetite continues to improve. Indeed, both Asian and emerging market indexes rose over 1%. The S&P 500 set all-time highs twelve different times in August and is headed for its seventh straight monthly advance.
The economic docket is light to end the month with only second-tier data such as the Conference Board’s consumer confidence print due out. There are also no Fed speakers on today’s agenda. As a result, the greenback is likely to continue to trade with the prevailing risk sentiment and end-of-month flows.
There is still plenty of important data on this week’s schedule including Durable Goods, PMIs, and Non-farm payrolls.
What to Watch Today…
- No major economic events scheduled for today
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While equities are in the green in most of the world, the Stoxx Europe 600 is the exception. Risk in Europe traded lower after European Central Bank Governing Council member Robert Holzmann said that the central bank should begin debating how it will end its pandemic-era stimulus.
The comments move the “taper talk” from the U.S. over to Europe for the first time. Holzmann also said that the Governing Council should “disentangle” its guidance on asset purchases from the path of future interest rates. The sentiment is eerily similar to the argument made last Friday by Fed Chief Powell who said that the Fed may start to taper stimulus this year but is in no hurry to raise interest rates.
The comments caused European equities to tumble and the Euro to find modest strength. EUR/USD is now at its strongest level since August 6th.
The New Zealand dollar is in rally mode and gained as much as 1.0% against its American rival. New Zealand Prime Minister Jacinda Ardern will partially ease the lockdown restrictions outside of Auckland, the nation’s largest city. Ardern pointed to evidence that the community outbreak of Covid-19 is being brought under control.
Auckland, however, will remain at “Level 4” restrictions for another two weeks. The move to reopen was enough to cause a quick rally for the Kiwi, erasing some of its steep losses of a few weeks ago when the restrictions were introduced.