The U.S. dollar is rallying across the board this morning with the Bloomberg Dollar Index approaching its record high hit last month.
Overview
Global equities are slumping to start the week after central bankers from around the globe indicated they were steadfast in their fight against inflation even as it comes with a cost. Traders have been slightly increasing bets that the Federal Reserve will act more aggressively since Jerome Powell’s speech in Jackson Hole on Friday. Before the speech, Fed Futures showed a 50% chance that the Fed may increase rates by 75 basis points in September instead of 50 basis points. Futures now show a 72% chance of a 75-basis point hike. The hawkish bias has been enough to spur further dollar growth. The dollar is set for its third straight monthly gain in August. There is no major economic data on today’s docket, with only the Dallas Fed Manufacturing report due out later. U.S. consumer confidence will hit the tape tomorrow morning. The biggest risk event on this week’s agenda is Friday’s non-farm payroll print due out on Friday morning.
What to Watch Today…
- No major economic events scheduled for today
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EUR
The Euro sank over half a percent overnight and fell within two-tenths of its 20-year low versus the greenback. However, the common currency has mounted a comeback in early trading. Much like with the U.S. Federal Reserve, traders are increasing bets that the European Central Bank will opt to boost rates by 75 basis points instead of 50 basis points at their upcoming meeting. Chances of a more aggressive policy-tightening decision are now over 50%. The ECB will conclude its two-day meeting on September 8th.
GBP
The British pound is lagging in starting the week as the British markets are closed for their Summer Bank Holiday. The sterling is down 0.5% at the time of writing but fell even further overnight. GBP/USD touched a year-to-date low earlier before rebounding modestly. With markets closed there is no financial data due out, and low market liquidity could lead to outsized moves.
