U.S. Dollar Tightens as Month Ends, Q4 to Come

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U.S. Dollar Tightens as Month Ends, Q4 to Come

SEPTEMBER 30, 2020

The U.S. Dollar remains in familiar ranges with markets mostly holding steady overnight.

Overview

If anything, it is possible today ends up being a weakening greenback session as data from this morning finally revealed the extent of COVID-19 damage to growth in the second quarter of the year while ADP Employment figures from September revealed an impressive uptick.

We learned that Gross Domestic Product and Personal Consumption fell by basically a third, yet the last month of Q3 saw 749K added payrolls, over 100K above expectation with the month prior’s figure upwardly revised. Perhaps a little hope still left for a fiscal rescue package from Congress could mean further fallout for the buck.

Doubts over the global economic outlook still hurt oil prospects the most and Mexican Peso is bearing the brunt, already close to being down by a percent from yesterday’s close. We will gauge further reaction to the statistics as well as to the political battle witnessed yesterday in a very heated U.S. Presidential debate. With large companies also planning major layoffs, we could be in for a wild session in trading today.

What to Watch Today…

  • No major events scheduled for today

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EUR

The Euro is trading in tight ranges with uncertainty over the release of funds from the €750BN and growing concerns from some European Central Bank that inflationary growth has been underestimates for way too long. Finland’s finance governor and ECB Governing Council, Olli Rehn, said that ECB policy will be accommodative for a long time, but inflation has been down a while and “threatens to continue that way.” He said COVID-19 has made it a necessity to do a strategic review. We shall see what the ECB may have under its sleeve, if anything other than statements, to incentivize price growth.

GBP

Although we wrote about a conciliatory tone yesterday, it looks like Brexit news are going to be erasing Pound gains once more. Overnight, the U.K. negotiators tried to establish new sets of norms for state-aid, a major piece of a post-Brexit deal that the two sides cannot seem to agree on. As a result, many traders are reassessing if the Pound can actually see a way to improve much more than where it is at without a major breakthrough, especially since all this economic uncertainty only bodes well for Bank of England to become use ultra-loose monetary policy and thus devalue Sterling.

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