The U.S. Dollar is modestly weaker today, with most of the Dollar Index’s decline coming against the British pound.
Overview
American equities are set to break a five-day losing streak, putting slight pressure on the greenback. The greenback is largely taking its cues from abroad this morning, especially with developments in Japan and Great Britain. Early this morning, the producer price index will hit the tape, but it will likely take a back seat to tomorrow’s consumer price index on the inflation front. This afternoon the Fed will release the minutes of their most recent meetings,
As always, there might be some clues as to the Fed’s future thinking on interest rates. Our inclination is that these minutes will also be overlooked in favor of tomorrow’s inflation print.
What to Watch Today…
- Producer Price Index at 8:30 a.m.
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JPY ⇓
The Japanese yen slid again against the dollar and broke its previous low reached back on September 22nd, which caused Japanese policymakers to intervene in currency markets. Japanese Prime Minister Fumio Kishida lent his support to the Bank of Japan’s ultra-loose monetary policy.
This policy is the main driver behind the yen’s weakness as the differential between the BoJ’s policy and its G10 counterparts widens with every meeting. Kishida also expressed his support for Bank of Japan Governor Haruhiko Kuroda. The yen has continued its spiral and is currently at levels last seen in 1998.
GBP ⇑
The British pound is enjoying an impressive rally this morning, gaining as much as 1.2% against its American rival. Most of the outsized move is based on speculation from a Politico article that new Prime Minster Liz Truss will make additional “U-turns” on her plan for the nation’s finances. The pound maintained its gains even after a report showed that the U.K. economy expectedly contracted in August. The 0.3% drop in output was the first contraction in two months and may be a sign that the U.K. is already in a recession. A deep dive into print shows a steep decline in manufacturing activity. If the pound can hold its gains today, it will snap a five-day losing streak.
