U.S. Dollar Quiet as Markets Fear Slowdown

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U.S. Dollar Quiet as Markets Fear Slowdown

JULY 26, 2021

The U.S. Dollar is trading in familiar ranges as the week starts with a mix of great earnings for some companies and fear among traders that growth is decelerating.

Overview

U.S. Treasury bond yields are showing that there is the fading belief that inflation will keep a very high pace with the 10-year-real-yield falling to its lowest on record, (-1.127%). The delta variant is affecting parts of the U.S. with lower-than-average vaccination fates and the rest of the world is still trying to distribute the ones they do have. Gaps between first and second doses are still very long for most people. This is most definitely keeping markets in doubt of the high valuations and aiding the buck as safe haven.

We have a few interesting risk events for the buck this week other than the daily questioning of our globe’s handling of the pandemic. The FOMC will announce their policy decision on Wednesday and Thursday we get to see second-quarter Gross Domestic Product for Q2. Expect a lot of concern over the pace of growth and if the remainder of the year will either keep up or mean a reduction. The 50/50 provides little in long-term guidance.

What to Watch Today…

  • No major economic events are scheduled for today

View Economic Calendar

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Q2 2021 Bloomberg Win

EUR  

The Euro is in tight ranges as markets establish that the European Central Bank will not be normalizing their policy anytime soon. Additionally, Germany is dealing with the damage and losses caused by historically devastating floods.

In general, it looks like the Euro-zone has plenty of room for improvement as its biggest economy lacks momentum and faces challenges. Also, we need to see if traveling opens up since now Dutch citizens are forced into quarantine coming into Germany and other nations because of the severity of the rise in infections in the past week.

GBP  

The Pound is looking to weaken more after last week showed Purchasing Managers Index figures below what economists expected. At the macro-level, the thing is the U.K. has slowed down a bit and there are growing concerns at the micro-level that trade in Northern Ireland and items related to finance products offerings will be more difficult for the U.K. going forward.

We think Sterling was overvalued at the start of the year and it may enter a period of further losses unless indicators start impressing.

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