Continuing yesterday’s trend following the release of positive PMI numbers for the United States, the Dollar is moving stronger once again this morning.
Overview
All three PMI readings from the US – manufacturing, services, and composite – showed an expansion in the month of October, a departure from the US’ European and British peers. Coupled with expectations that tomorrow’s GDP reading will show that the economy grew 4.5% last quarter, the Dollar is following the US-exceptionalism narrative that has become commonplace as of late.As central banks around the world begin this meeting cycle today with the Bank of Canada at 10 AM, many are faced with a conundrum of recalcitrant inflation coupled with stagnant economies. Perhaps the most prominent example of this quandary is found in the Eurozone, where inflation still strikes in at 4.3%, but most, if not all, of the nations comprising the region are teetering on the brink of economic contractionary territory. While Christine Lagarde, European Central Bank President, has declared the fight against inflation all but won, one must question whether this is factual or if her hand has been forced by a stagnant economic picture. The US, by contrast, has continued to post remarkably strong economic figures, as emphasized by President Joe Biden.
The Federal Reserve finds itself currently in a markedly different position than its overseas peers. The US consumer has continued to outperform expectations, and a central bank expecting softening is in a relatively tough spot, though some would argue it’s a good problem to have.Expectations of any further tightening out of the Fed have shifted toward December’s meeting, but Powell’s press conference next week after a nearly inevitable rate hold on November 1 will be key to determining the direction of USD for the remainder of the calendar year.
What to Watch Today…
- Bank of Canada Rate Decision, Wednesday 10 AM
- European Central Bank Rate Decision, Thursday 8:15 AM
- US GDP Q3, Thursday 8:30AM
- US PCE, Friday 8:30 AM
- Monex USA Online is always open
CAD ⇓
Moving faster than its G10 peers this morning is the Loonie, in quite the reversal from the trend at the beginning of this week and posting a loss of nearly a third of a percent against the Dollar. The Bank of Canada is widely expected to hold interest rates steady this morning, but traders will be watching for signals regarding future meetings. Canada’s economic fortunes this year have been quite the mixed bag, but there remains room for an upside surprise if the BoC signals that its hiking campaign is not, in fact, finished.
AUD ⇓
The Australian and New Zealand Dollars are losing substantial ground overnight and into this morning after news out of China broke that beleaguered property developer Country Garden Holdings Co. is in default on a dollar bond for the first time in its history. Though this is not necessarily unexpected, it serves to highlight the cracks continuing to widen in the world’s second-biggest economy. As the Antipodean nations remain strong trading partners of China, their currencies are moving in tandem with the grim news.
