The story of the morning, after a relatively calm session yesterday, is all positive for the United States Dollar today.
Overview
Though there’s little in the way of hard data out of the US today, a soft Chinese manufacturing print overnight is depressing equity prices across the world and driving Dollar strength. The Caixin manufacturing purchasing managers index declined to a six-month low, showing a contraction in China’s manufacturing sector and depressing both Asian equities and currencies. China’s currency regulators have also (albeit informally) asked some commercial banks to postpone purchases of USD, showing more weakness in the region and likely having the opposite of its intended effect.
It seems the dust has finally settled after several central bank meetings last week, and while the Bank of England’s rate decision remains this Thursday, general sentiment is dollar positive. At the moment, Jerome Powell’s statement and presser seemed vaguely dovish, but he was outdone on that front by Lagarde of the ECB and Ueda from the Bank of Japan. Australia’s Reserve Bank also followed the doves last night, keeping rates steady and painting a picture of a Federal Reserve that may be both better equipped and more willing to make the necessary moves to return to a 2 percent inflation target.
The importance of bipolarity in the modern global economy, once again, can’t be overstated. While US data remains strong even in the face of a historically active Federal Reserve, China’s economy appears to be sputtering, driving USD strength on a macro level.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇓
After trading relatively flat during yesterday’s uneventful session, the single currency this morning is declining against USD and just off its weakest price since July 10. A mixed bag of PMI and unemployment data from several Eurozone nations are keeping expectations for the European Central Bank’s next decision quite murky, as questions remain around whether the region’s larger economy can tolerate further tightening moves by the ECB.
AUD ⇓
The Australian Dollar, proving to be one of the most volatile currencies in the G10, posted a loss to the tune of 1.5% against the USD overnight after the Reserve Bank of Australia unexpectedly decided to hold interest rates steady rather than hiking the expected 25 basis points. Philip Lowe, in his last meeting as head of the central bank, did leave the door open for future rate hikes, but traders are unconvinced as the RBA has previously stated its willingness to tolerate higher inflation for longer to preserve the strength of the larger economy.
