Quiet U.S. Dollar, but vulnerable Sterling without elections

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Quiet U.S. Dollar, but vulnerable Sterling without elections

SEPTEMBER 10, 2019

The U.S. Dollar is stuck in familiar ranges as global markets ease of the brakes after surging last week.

Overview

Markets have plenty to wait for in the European Central Bank meeting on Thursday as investors look for clear guidance on how much stimulus may be coming with the Fed and Bank of England also making announcements next week. Light data on our front will keep FX at the mercy of new headlines over trade as well as the politics of Brexit.

As far as domestic optimism is concerned, the National Federation of Independent Business Index revealed a more pessimistic sector with the reading coming in lower every month since May. A recent poll found that 6 in 10 American expect a recession, which could further explain the anxiety in the economy now. The buck is not moving much, and we expect quiet times ahead of the ECB announcement and what will one of the last press conferences featuring President Mario Draghi.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The Euro is trading in tight ranges as are most majors counter to the dollar-based on lack of an outlook on most trade items and monetary easing. A slew of data last week revealed that the Euro-bloc is holding on to very minimal expansion, primarily as Germany has struggled to prevent further contraction to indicators such as Industrial Production and Purchasing Managers Indices.

In response to the slowdown, Germany’s Deputy Finance Minister Bettina Hagedorn said there is a possibility that the German budgets through 2023 are adjusted in order to make up for the drag in the economy. While balanced budgets are what the country shoot for, perhaps expansionary fiscal policy is coming as the need for German contribution grows with GDP for the Euro-zone just at a quarterly 0.2% pace.  We see Euro chances for appreciation if indeed German figures change for the better. We get to look at inflation in the form of the Consumer Price Index on Thursday.

GBP

Pound Sterling continues to give headaches with its swings, but at least it is clear that we will not be heading towards a general election in the next month. Prime Minister Boris Johnson has failed to get enough votes several times to get his desired snap election, but Parliament will indeed be shut down until October 14th.

Johnson has promised to work on a deal with the EU and to have something by the October 17th summit. While the EU has made it clear they will not budge, Johnson is hoping that May’s deal can be tweaked enough to get some of what he wants. He has also vowed not to delay the October 31st deadline for Brexit, deal or no-deal. Prepare for a tumultuous six weeks.

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