After recovering substantial ground through yesterday’s trading session, the United States Dollar is trading a touch weaker against all majors this morning amidst month- and quarter-end flows
Overview
After recovering substantial ground through yesterday’s trading session, the United States Dollar is trading a touch weaker against all majors this morning amidst month- and quarter-end flows. The Bloomberg Dollar Spot Index yesterday morning looked set to wipe out all its yearly gains, but sharply reversed course and closed the day half a percent stronger. It’s clear, however, that we have entered new and weaker ranges for USD against all G10 currencies as the globe makes its firm pivot toward looser monetary policy.
A deluge of US data prints was released at 8:30 this morning, including the final reading of Q2 GDP and the corresponding price index. The US economy grew 3.0% in the second quarter of this year, holding steady from the previous reading and a touch higher than market expectations, which expected a small downward revision. The corresponding GDP price index also showed that prices increased 2.8% last quarter, on expectations again. Perhaps the only real surprise came from the release of durable goods orders for August, which traders expected to contract by nearly 3% but actually came in flat. All told, this morning’s data dump paints a picture of a still healthy economy and is keeping this morning’s Dollar-down move rather muted.
More news of stimulus out of China, too, is reinjecting some risk appetite into markets after yesterday’s decidedly risk-averse session. Chinese authorities, according to state media, are considering a capital injection of 1 trillion yuan into the nation’s largest state banks to continue to fuel economic recovery after Tuesday’s dramatic monetary policy moves. USDCNH has moved dramatically lower over the last couple sessions, and Chinese equities are – finally – in solidly positive territory.
This already jam-packed day still has much more to offer, as several Fed officials including Chair Jerome Powell are scheduled to speak through the day. Banxico, too, will release its latest policy decision this afternoon, following the Swiss National Bank’s decision to cut rates by 25 basis points this morning.
What to Watch This Week…
- US PCE Price Index, Friday, 8:30 AM
- Monex USA Online is always open.
MXN ⇓
Mexican Peso is weaker on the week in choppy trading ahead of Banxico’s decision this afternoon. MXN has taken quite a leg lower over the last few sessions, as the central bank is widely expected to continue to pare back its ultra-high interest rate by 25 basis points today. Additional chatter about the country’s judicial reforms, too, is keeping MXN on the back foot. Moody’s Ratings analysts yesterday announced that Mexico’s recently-passed court reform could directly affect the country’s credit, placing a pallid cast over the Morena party’s proposal writ large. MXN led losses among major currencies yesterday in response.
AUD ⇑
The Antipodean currencies of Australian and New Zealand Dollar continue to be large beneficiaries of China’s new fiscal and monetary policies, both trading more than three quarters of a percent higher against USD this morning. The Politburo vowed overnight to steady China’s ailing housing market and increase fiscal support, following Tuesday’s unprecedented monetary easing. Such stimulus is likely to keep AUD afloat in the short and mid-term, as commodity prices see less downside risk and economic growth from Australia’s largest trading partner is more assured.
