Dollar Trades on Front Foot; Commodity Currencies Struggle

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Dollar Trades on Front Foot; Commodity Currencies Struggle

The U.S. dollar is stronger this morning, as it attempts to shrug off its worst month in years in July.

Overview

The dollar lost 3.3% in July, its worst performance since early 2018. The greenback has advanced nearly half a percent even as equity markets around the globe are trading in the green.

Later this morning, Markit US and ISM will release their manufacturing data. PMI prints are forward-looking so have been given extra importance during the time of COVID. There is also a number of Fed speakers on this afternoon’s docket that includes St. Louis Fed President James Bullard, Chicago Fed President Charles Evans and Richmond Fed President Tom Barkin.

The largest risk event on the fundamental calendar this week is the July employment and jobs report on Friday.  After April’s report showed over 20 million Americans lost their jobs, we saw a significant rebound in May and June.  However, as Axios Markets points out, there is a growing concern on Wall Street that we could see a large job loss again in July.  Nevertheless, the median survey of economists shows an expected gain of 1.5M jobs in July. The wide scope of expectations is all but certain to create volatility on Friday morning.

What to Watch Today…

  • ISM and Markit US manufacturing prints

Complete Economic Calendar can be found here.

EUR

The Euro slipped against the U.S. dollar overnight even as European equities continued to march higher.  The common currency gained 5% versus the beleaguered greenback in July so today’s pullback may indicate the Euro’s move may have been overdone.  Conversely, EUR/USD may be just be consolidating near fresh 2-year highs before moving higher again.  Time will tell but at the moment there is little on the docket to help the greenback recover significantly.

AUD

Commodity-based currencies are also in the red this morning, led by a 1.0% drop in the Norwegian Krone.  Oil cartel OPEC announced a plan that would boost crude output, putting downward pressure on the price of crude.  Oil has recovered somewhat in early trading but currencies such as the NOK and the Canadian dollar remain lower.

The Australian dollar was also lower this morning on fears of new outbreaks on the island nation.  Victoria, Australia’s second largest state, declared a state of disaster and imposed a nighttime curfew in the city of Melbourne.

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