With the notable exception of the Euro, the United States Dollar is trading in positive territory across the G10 this morning amidst a rather lackluster global data calendar after sliding during yesterday’s session.
Overview
US stock futures are mostly flat today after closing at yet another record high yesterday, keeping the inverse correlation between the Dollar’s performance and that of US equities strong. Ten-year Treasury yields have slid a touch as well today, ticking one basis point higher. As it stands, however, the Bloomberg Dollar Spot Index has still nearly wiped out its annual gains, and our year-long forecast of a slowly depreciating Dollar looks to be on target.
Markets are continuing to digest the global implications of yesterday’s substantial Chinese economic stimulus, and USDCNH briefly touched levels not seen since May 2023. These moves are keeping global risk appetite afloat, and haven assets, with the exception of gold, are staying rather depressed in pricing. Emerging markets have proved to be a big beneficiary of both global central bank easing and China’s moves – MSCI’s emerging market equity index reached its strongest point since April of 2022, and one EM currency gauge added as much as 0.3% in overnight trading. Consumer confidence in the US did drop the most in three years in September amidst growing fears surrounding the health of the labor market, which is this morning keeping equities flat and giving FX traders a little bit of breathing room and keeping further Dollar losses at bay this morning.
There have been further central bank meetings this week, and still more to come. The Swedish Riksbank cut interest rates today a quarter of a percent and signaled as well that a cut of 50 basis points in the coming months is possible, adding fuel to the global easing fire. Due to tomorrow, markets get news from Banxico and the Swiss National Bank, the former anticipated to cut interest rates by 25 points after Mexican inflation ticked down last month.
What to Watch This Week…
- Banxico meeting, Thursday
- US GDP Q2 Final, Thursday 8:30 AM
- US PCE Price Index, Friday, 8:30 AM
- Monex USA Online is always open.
USD ⇑
Amidst a global return of risk appetite boosted by central bank cycles and Chinese stimulus, the Swiss Franc is sliding against USD this morning. The Swiss National Bank releases its latest policy decision tomorrow morning and is widely expected to continue its easing campaign. SNB authorities have shown growing concern over CHF’s pronounced strength, especially against EUR over the last few months, though this morning, CHF hit its weakest point against the single currency in more than a month.
AUD ⇓
The Australian Dollar is retracing some of this month’s bull run this morning, even following a rather hawkish hold from the Reserve Bank of Australia, as headline inflation fell to 2.7% year-over-year. This places inflation within the RBA’s target range for the first time in three years, and traders are reacting in kind and moving bets on the beginning of the RBA’s easing cycle sooner. Nonetheless, AUD is still trading close to multi-month highs against USD as traders continue to, perhaps overzealously, pile into bets of more easing faster from the Federal Reserve.
