The U.S. Dollar is trading in stronger ranges across the board with the growing concern over elevated interest rates for a long period of time.
Overview
With such pessimism, the Buck is naturally rising, and investors are adjusting to treasury-bond yields on 30-year notes hitting their highest level since 2007. Although there has been evidence of “soft-landing” in the U.S., recessionary fears are growing for 2024, especially as interest rates are perceived as ongoing obstacles to investment and growth.
The worry over borrowing costs not fading away anytime soon was exacerbated by comments from Cleveland Fed President Loretta Mester who sees the need for another interest-rate hike this year in order to push inflation towards the 2.0% target. Without any major data out today, equities will likely have little to use that can spur a change in mood. It is worth noting that another Fed official will speak today, Atlanta Fed President Raphael Bostic, who will specifically tackle the outlook on inflation and growth. JOLTS Job Openings for August will be out at 10AM.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
EUR ⇓
The Euro fell to a fresh new low point since December as global growth looks fragile in comparison to the American story and investors towards the safe haven of the U.S. Dollar and its treasuries. Despite European Central Bank President Luis de Guindos making hawkish comments explaining the ECB is not likely to pivot from its tightening monetary mandate, the fear is that those high borrowing costs will only cause contractions and lead to a recession for the continent. We will hear more on the topic from other officials and likely ECB President Christine Lagarde tomorrow, although she is only scheduled to give an opening speech at a conference. September Purchasing Managers Index will be out for the Euro-zone tomorrow, as well as August figures for Retail Sales as well as Producer Price Index.
GBP ⇓
Sterling has lost 1.5% of its value since Friday as the new quarter begins with relatively gloomy outlooks for growth. Although data has defied expectations of a bigger slowdown and no recession has materialized in the U.K., the high levels of interest rates are fomenting the same negative thoughts experienced a year ago. We feel that the U.K. will rejoin the EU, not as a member, but a closer partner, especially as it throws more support towards the Ukraine effort to combat the Russian invasion.
Fiscal growth along with direct investment may change the tide, but it is clear that even the Bank of England wants to hit the brakes on its hawkishness and take a wait-and-see approach. If the U.K. has managed to avoid going into the red as it was predicted, could better things be in the horizon with regional cooperation?
