The United States Dollar is continuing its winning ways of late this morning, gaining ground across both major and minor currency markets.
Overview
The Dollar Spot Index is sitting at a five-week high at the time of writing, its best level since June 23rd. The first reading of US GDP was released this morning and showed a substantial rebound from Q1’s contraction – today’s figures show that the US economy grew an unprecedented 3% from April through June, substantially above market expectations. Given that Q1 GDP was so poor, showing the economy actually contracted 0.5% in the first three months of this year, this release’s turnaround will no doubt bring some relief to the White House. Taken in context, too, of swirling worry about the impact of the Administration’s international trade policies and their potential impact on economic growth, the President will no doubt tout the figure as a sign that the macro-economic picture is in fact quite healthy and concern on policy impacts to GDP long-term may be, in the Administration’s view, unfounded. Important to note, however, is that this 3% growth rate does come at least partially from a marked decline in imports, which quite clearly is a direct result of adversarial trade policy. Final sales to private domestic purchasers did slow down, a sign that economic momentum may not continue through the remainder of the year.
The economic calendar, even for just today, is nowhere near finished, and the Federal Reserve will release its latest policy decision at 2PM Eastern this afternoon. It’s virtually guaranteed, based on overnight swap market odds, that the FOMC will choose to hold interest rates steady today, but traders will be grasping for any signals from the central bank as to how much policy easing markets can expect this year and beyond. FOMC Chair Jerome Powell’s press conference following the decision at 2:30 will be watched quite closely, especially given the animosity as of late between Powell’s Fed and the Executive branch of the government. Administration officials, including the President, have taken aim at the cost of the renovations of the Fed’s Washington, DC headquarters, and it’s fairly likely Powell will have to address these questions once again this afternoon. President Trump, for his part, has espoused that the Fed’s target interest rate is far too high and has called for a slash from the current rate of 4.5% down to as little as 1%.
What to Watch This Week…
- FOMC Interest Rate Decision, Wednesday 2PM
- PCE Deflator Index, Thursday 8:30AM
- Non-Farm Payrolls JUN, Friday 8:30AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇓
The single currency is falling versus the Buck for the fifth straight trading session, weakening a further 0.6% in overnight trading into the US open. French GDP, released earlier this morning, did beat expectations and showed economic growth of 0.3% in Q2, but this has not proven to be nearly enough to turn around EUR’s fortunes as the month comes to a close. EUR’s slide has been driven predominantly by dissatisfaction from many nations in the bloc over Ursula von der Leyen’s trade deal with the US, which promises heavy economic investment coupled with a still-punishing 15% levy on nearly all goods.
JPY ⇓
Japanese Yen, though still managing to outperform some of its major peers, is continuing to lose ground versus USD to the tune of a third of a percent this morning. Tsunami alerts have been sent out across the island nation following a massive earthquake in the Pacific Ocean overnight, and the Yen’s traditional safe haven status has helped to minimize its losses in comparison with some other G10 currencies.
