U.S. Dollar dominant as majors flounder

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U.S. Dollar dominant as majors flounder

SEPTEMBER 03, 2019

A busy week for European data this week as we start the month with the Euro even weaker than last week and Italy continues to navigate its political situation.

Overview

Additionally, the shared currency is in at its weakest point since 2017 because financial heads are indicating they would like to see a stimulus package from the European Central Bank and investors believe a cut to interest rates that would mean dipping into negative territory will occur.

Certainly, the fortunes of the Euro can only change with evidence that the continent’s economy does not need monetary aid and if enough of that argument is made at the September 12th ECB meeting the currency could see a bit of a comeback. It is worth keeping in mind though that when the Fed and the Reserve Bank of Australia have decided to act with loose policy their currencies initially appreciated, thus Euro might face a similar fate as markets interpret that intervention is a good step forward and positive economically.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The shared currency is down to its weakest prices since January 5th, just at the cusp of being below its worst level of 2018. GDP figures for Q1 revealed a 0.4% expansion, meeting the low expectations that economist foresaw. Frankly, the environment is healthy, but the growth pace is low and could become worrisome if it does not pick up in Q2.

The European Central Bank has based its potential tightening stance on the consistency of widespread recovery, but Italy is dragging and the bigger economies are only expanding at measly levels. Hiking interest rates for 2019 may still be delayed further. Producer Prices are scheduled for tomorrow, which will help gauge if there is enough inflationary growth in business activity.

GBP

The fun continues in the United Kingdom as outside observers try to make sense of what a suspension of Parliaments and what it could achieve as we have two months left to decide Brexit. Over the weekend, Prime Minister Boris Johnson seems to have threatened a call for general elections, perhaps confident that he would establish his government and approach to the process with a result in his favor. The very concept of leaving the EU without some sort of deal is predictably disastrous, something pointed out by the Bank of England’s governor Mark Carney, thus we believe they will try to avoid it, but it’s looking blurry as to what will come October 31st if not a delay.

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