The United States Dollar is trading in mixed, but slightly positive overall, territory this morning at the beginning of a somewhat calmer macro week compared with last week’s exceptionally busy data calendar.
Overview
Several speakers from the Federal Reserve are on the books today, and markets are looking for them to shed some further light on the central bank’s decision to jump-start its easing cycle last week with a supersized 50 basis point cut. US markets have moved their focus to pricing Fed expectations for the remainder of the year, and as odds stand now both of the remaining two meetings are priced at a coin flip between 25 and 50 basis points.
In an essay, Minneapolis Fed chief Neel Kashkardi was the first on the docket earlier this morning and signaled his support for a further 50 basis points of easing from the Fed this year, less than market expectations of 75. Kashkari is not a voting member of the FOMC this year but does participate in monetary policy discussions, and he highlighted the same mild concern for the health of the labor market that Powell & company have been commenting on the last several weeks. In his essay were his comments on what may be a new neutral rate of interest, higher than previously believed by many Fed officials. This statement places Kashkari close to the median Fed forecast, which also sees 50 basis points of further easing this year, and many officials have spoken in support of a higher neutral rate this year.
Still to come today are US September preliminary PMI, and more Fed speakers, Bostic and Goolsbee. The biggest release from the US this week, however, isn’t due out until Friday as we’ll receive August’s PCE data, the Fed’s preferred inflation gauge. Though obviously retrospective to the Fed’s cut last week, this reading will be a good indicator if the Fed’s move was appropriate or perhaps a touch overzealous.
What to Watch Today…
- S&P September Flash PMI, Monday 9:45 AM
- 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.
EUR ⇓
The single currency is the biggest loser in the G10 this morning, down a third of a percent against USD, following the release of European PMIs that raised further concern about the health of the region’s larger economy. French and German data, in particular, dragged down the larger Eurozone reading, as the bloc’s two largest economies both showed rather dismal performance preliminarily for September. The region-ride release posted a composite figure of 48.9, which does place it in contractionary territory and has driven a fair bit of repricing of ECB expectations. As recently as last week, ECB officials had stated that it would take a material change in the health of the region’s economy to consider a cut in October, and markets are approaching this morning’s release as if it may signal the start of such a change.
GBP ⇑
The pound sterling is continuing its bull run lately, trading a touch positively against the USD this morning. The UK also released preliminary PMIs for September this morning, and while by no means blowing expectations out of the water, their tepid-but-still-positive reading keeps GBP afloat, especially in comparison with its peers in the Eurozone. Traders have been building bullish positions on the Sterling for a few weeks now, and while there are whispers of overbuys ahead of the new Labour government’s first budget due out at the end of next month, GBP has all the momentum in the G10.
