The U.S. Dollar Index is up a touch this morning, with most of the gains coming against the Euro following poor PMI prints.
Overview
Global equities are struggling this morning, giving the greenback an additional modest boost. Despite some red across the board in global equity markets, global stocks are still on course for their strongest week in a month. U.S. Purchasing Managers’ Index numbers are due out at 9:45 a.m. and hope to fare better than our European counterparts. After today’s data, market participants will quickly shift their attention to next week’s Federal Reserve meeting. We expect the central bank to hike rates 75 basis points. Earlier this month a full percentage point hike seemed on the table, but we view that as unlikely now. Most expect that the Fed will then shift with a 50-basis point hike expected in September and then two 25 basis point hikes to end the year, putting the upper range at 3.5%. That would represent the highest rate since 2008.
What to Watch Today…
- US PMI at 9:45 a.m.
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EUR
After a choppy session yesterday, the Euro sank overnight. Yesterday morning, the Euro initially popped considerably higher against the greenback after the European Central Bank surprised some and hiked interest rates by 50 basis points. However, comments by European Central Bank President Christine Lagarde following the decision were not as hawkish as some had thought. Guidance for overall interest rates remained unchanged despite the more aggressive hike yesterday. The euro gave up all its initial gains.The common currency is now at its lowest level since Tuesday, falling more than half a percent this morning following poor economic data. Germany’s PMI numbers showed that economic activity is slumping for the first time in two years. The print of 48 is below the neutral reading of 50 and is the worst reading in 25 months. France, Europe’s second-largest economy, also suffered dismal PMI prints. The Eurozone as a whole is also disappointed.
MXN
The Mexican peso is currently gaining versus the U.S. dollar after data showed that inflation continues to rise. Prices rose over 8% to their fastest pace since early 2001. The high price pressure increases the chance that the Mexican central bank, known as “Banxico”, will have to aggressively raise rates at its next meeting in August. Banxico hiked rates by 75 basis points in June, its biggest increase ever.
