The U.S. Dollar is dominating at the moment with a sour mood across markets to start September.
Overview
China is once more the culprit in slowing down any kind of progress in getting away from the trade woes of COVID-19. The large city of Chengdu is now under lockdown, only exacerbating concerns that China’s role in global growth is negatively impacting all outlooks. Naturally, a wave of risk aversion is taking hold across markets.The factory slowdowns remain a challenge that has not been fixed, and the idea that China will continue to close major manufacturing hubs only makes a flight to the buck’s safety more reasonable. Central bankers want the economy to cool down some, but prices are likely to get even higher as international commerce adjusts to yet another blow to the supply chain.Per labor data earlier today in the form of Initial Jobless claims and Unit Labor costs, it looks like things are steadily cooling down as the Fed wants. Tomorrow’s Non-Farm Payrolls will be the biggest risk event of the week that can further convince the Fed to continue with 75-basis-point interest rate hikes. Such a prospect only adds to the buck’s current safe-haven status.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
The Euro fell once again near its early 2000s levels as the globe reacted to the bad news out of China. Although the news about gas reserves has calmed some fears about being able to sustain through the winter, the energy crisis will not allow for upwardly revised outlooks anytime soon.
Earlier manufacturing data revealed that S&P Euro-zone Purchasing Managers Index figures advanced slightly lower than expected, meaning that the prices suppliers are dealing with are consistently easing a bit. We shall see if the European Central Bank is ready to be hawkish and hike by 75bps themselves.
GBP ⇓
The Mexican Peso is among the most resilient currencies lately to the buck’s intense rise. After improving by 1.0% in August, it is possible there is room for growth if oil prices start recovering. Mexico happens to also enjoy isolation from much of what ails the world when it comes to the hits to commodities and trade because of the war. Thus far, MXN is not down by half a percent like most other majors.
