Even after the last of the major data points out of the US were released this morning in PCE, the United States Dollar is fairly flat today and is set to close this week out with a slight gain on the Bloomberg Dollar Spot Index.
Overview
Today’s data showed that prices grew on expectations last month, but annualized price growth did not fall as much as markets expected. The core reading also came in flat on the monthly side but slightly higher than expected on an annual basis. Additionally, while personal income grew less than expected, personal spending remained flat and last month’s personal spending was revised higher. The Dollar is responding to such a mixed bag of data in a rather lackluster manner and is trading steady after giving up some of yesterday’s gains across the G10 basket.
Doom and gloom surrounding global growth prospects have dominated the mood this week, but markets are attempting to break out of their recent funk this morning, and US equities are set to open higher after PCE did not upend inflation projections or change bets that the Fed will begin cutting interest rates in September. Asian and European equities largely performed positively, and demand for haven assets and currencies declined overnight. Tech stocks led the week’s downward slide and emerging-market assets followed suit, but all are set to try to rebound today after a dismal week of trading. Risk sentiment, across the board, is better than it has been in a while, but that’s not to say it’s in any way strongly positive – just less negative. The details of this morning’s PCE report do show that consumers may be stretched thin, but markets have already come to expect such a reading from the last few months of personal consumption and spending data.
Markets will not receive any reaction from Federal Reserve officials on today’s release ahead of Wednesday’s interest rate decision. No change in the US interest rate is expected next week, but traders will—as always—be looking for further future guidance and expect some softer language, all but guaranteeing a 25 basis point cut in September. The Bank of Japan and Bank of England also meet next week and will release their latest interest rate decisions on Wednesday and Thursday, respectively.
What to Watch Today…
- University of Michigan Consumer Sentiment, Friday 10 AM
- Monex USA Online is always open.
AUD ⇑
The Antipodean currencies of the Australian and New Zealand Dollar have finally found some positive footing this morning against the USD after a dramatic slide in the front half of this week. AUD has gained nearly four-tenths of a percent back, and NZD is attempting to follow suit with its own 0.2% gain. Commodity prices at large are rebounding slightly today and market risk sentiment is a bit better than it has been the rest of this week, but AUD is still the week’s worst performer in the G10 even as iron ore prices rose overnight.
JPY ⇓
Japanese Yen’s fortunes for the week have finally reversed course after running up the score against USD and most other major currencies since mid-month, and JPY is a touch weaker today after sliding yesterday as well. JPY’s unprecedented rally amidst the unwinding of carry trades around the world, investors say, may be at risk next week if the Bank of Japan decides to hold interest rates steady instead of hiking at next week’s meeting. Nonetheless, JPY has still climbed roughly 5% against the USD since July 11, when currency authorities are widely suspected to have intervened.
