U.S. Dollar Weaker as Europe has Vaccine Hopes

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U.S. Dollar Weaker as Europe has Vaccine Hopes

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The U.S. Dollar is set to decline this morning as overnight markets rejoiced over some developments in U.S.-China trade talks, which only add to ongoing positive sentiment across the globe.

Overview

Although COVID-19 news yesterday suggested re-infection and Europe has seen flare-ups rise, the economic momentum is not fading on a global scale and there is an appetite for risk. Confidence is rising and damages to the Gross Domestic Product of countries such as Germany were revised downward, meaning things are holding up better than thought and bound to recover.  We shall see if this can keep going as we get Consumer Confidence and Home Sales figures here out at 9AM.

More importantly, markets are up on reports that the U.S. and China had friendly talks over the phone and put aside disagreements over certain agricultural purchases, which have been cut by half of what was promised this year because of the pandemic. Robert Lighthizer, the U.S. Trade negotiator, said that “both sides see progress.”

Other than the physical threat of the virus, we shall see how things play out with hurricanes Marco and Laura, which could affect an already fragile energy industry and infrastructure.  Also, we will keep an eye on news from Moderna, Inc. in Europe, which claims could have as many as 80.0MM vaccines to distribute across the EU soon.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

EUR

The Euro returned to gaining ground overnight following data out of the bloc largest economy, Germany. GDP for Q2 was revised as the contraction was less (-10.1) estimated, Industrial Production grew by 5.0%, and Ifo Business Confidence was better than expected.

It is true that in recent days the overall continental recovery has been somewhat scrutinized, but with the German leading the way, it is likely the continent can avoid major collapses in indicators moving forward. In the next few days as the week closes we will get numbers out of Italy and other member nations that can clarify if Euro will be heading towards lower levels or remain steady in these 2-year-best ranges.

GBP

Although the U.K. is suffering from high joblessness and the uncertainty over Brexit and trade with EU, the Pound is up bouncing off of risk-appetite, news of a potential vaccine, and a less pessimistic Treasure (Exchequer department) in its projection for the second half of the year economy. 

A survey of Her Majesty’s Treasury revealed that there is agreement among economists that the second half of the year will signify a very strong “V-shaped economy.” If this can happen, the dollar is bound to suffer more losses, but consistency is key and while the message is positive from Britain, we need more proof is progress in other fronts.

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