The U.S. dollar is weaker today, albeit near multi-year highs versus multiple rivals.
Overview
Risk appetite is stronger this morning following the news of the Chinese stimulus (an additional 146 Billion USD worth) and decent economic data out of the Eurozone’s largest economy. Weekly jobless claims and the second reading of second-quarter GDP will hit the tape at 8:30 a.m. The focus will then quickly shift to tomorrow’s speech by Fed Chairman Jerome Powell. It is widely expected that Powell will have a hawkish tone and reiterate the central bank’s commitment to fighting inflation.
The question is, how hawkish? If Chairman Powell gives even a hint of dovish commentary on future policy, we could see stocks roar and the greenback fall.
What to Watch Today…
- Second reading of GDP at 8:30 a.m.
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EUR
The Euro popped higher yesterday and was able to extend its gains overnight. The overnight support is likely a result of slightly positive economic news in Germany. The German economy grew 0.1% in the second quarter, better than the previous reading. While the headline is decent, the print will do little to quell fears that the Eurozone is already in a recession. Indeed, business confidence in Germany fell this month.
The IFO Institutes gauge of business expectations for the next six months fell to 80.3 in August from 80.4 in July. The only bright spot is that the reading was not as poor as economists had expected. Minutes from the last European Central Bank meeting will be released later this morning.Regardless of the Euro relief rally over the last day and a half, the common currency is less than one percent away from a 20-year low against its American counterpart.
AUD
The Australian dollar was the biggest gainer among G10 currencies following the announcement of a massive Chinese economic stimulus. China is set to increase its economic stimulus by 1 trillion yuan to help the economy still battling with repeated Covid lockdowns. As China is Australia’s largest trading partner, good news for the Chinese economy is expected to have a positive impact on Australia and commodity prices.
The New Zealand dollar was unable to take advantage of the news following domestic data that showed retail sales failed to meet expectations.
