The U.S. Dollar is stronger this morning, having advanced five out of the last six sessions, setting it up for its biggest weekly appreciation since June 2021.
Overview
A week characterized by renewed concerns over uncontrollable inflation worldwide has also seen equity traders and investors take a step back from all of the optimism that the start of the month brought with it. The reality is that at this point, any future 3-month to 2-year outlook is absurdly blurry because the pandemic left damage to the supply chain, and everyone is adjusting to the true effects of not fully utilizing the globalized system because of the war.The U.S. is not done combatting inflation; in fact, two of the Federal Reserve’s voting members voiced their concern with how markets seem to be pricing in some sort of slowdown in pace and willingness to hike. St. Louis Fed President James Bullard and Kansas City’s Esther George explained that the Fed is ready to hike interest rates until it starts seeing progress towards the 2.0% target. Data will matter to the Fed in its decision-making, but they are making it clear that they are not considering a turnaround to a more dovish policy. The Jackson Hole symposium next week will be key to untangling doubts about Fed thinking.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro is back down to its weakest point in a month as the increased chances of a deep recession across the EU have downgraded all kinds of outlooks. Although Germany has tried to ease consumers’ pain at the gas pump, a new energy storage levy on households will make energy even more expensive.
Producers Price Index for the month of July revealed a shocking increase of 5.3% vs. 0.7% expected, while the year-on-year went up from 31.8% to 37.2%. It is indeed their highest on record. We shall see how much speculation over European Central Bank tightening will give Euro a chance to bounce back. The swings continue.
GBP
The Japanese Yen has depreciated by over 4.0% since August began, taking it back down to its weakest point in about a month. The rapid nature of the move shows just how unstable things are right now across markets, despite earlier hope that we are on a path towards a “soft landing.”
Things are bad elsewhere, with COVID still restricting full activity, preventing travel, and discouraging investment. While stocks can tell one story, it looks like FX is illustrating just how unsafe things feel at the moment with no clear solutions to much of what ails the globalized system that the pandemic affected dramatically, and war exponentially worsened.
