As yesterday’s risk-off mood grows and continues to dominate markets, the United States Dollar is squarely at the top of the G10 board.
Overview
Dismal Producer Manufacturing Index readings out of several Eurozone and Asian nations are increasing the risk of a global economic contraction, and as the US holds its collective breath for its PMI reading later this morning, it seems the US economy may avoid the worst of this collective slowdown.
Jerome Powell’s testimony to Congress this week did seem to assuage markets and reinforce the Fed’s message that the US central bank has two more rate hikes in play. Though softening his message slightly Thursday in comparison to Wednesday, he solidified his position as a steady hand and showed the Fed is aware and up to the task at hand of delivering the mythical “soft landing” to the domestic economy. The remaining portion of the Fed’s tightening task appears, as of now, to be a bit easier than that of most central banks around the world.
Equities are down globally this morning as investors search for a safer bet, prompting a run for the Dollar. Though the economic picture in the US remains complicated and not without risk altogether, its position as both a safe haven and better off than most major economies is driving demand for USD today.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
The single currency is taking a beating against the Buck this morning after PMI releases from France and Germany came out quite a bit lower than expected and signaled an increasing potential for a region-wide recession. The Eurozone-wide reading, though not quite in contractionary territory, also came in quite a bit lower than expected, spooking markets. In the weeks ahead, inflation data will hit the wire, and while it’s expected to show signs of slowing, it likely won’t be fast enough for the ECB, which is currently looking toward at least two more rate hikes. Investors are expecting pain in the wider EU economy in the coming months
AUD ⇓
The Australian Dollar is the worst performer of G10 currencies for the week, losing upwards of 2.5% against USD this week, including over a percent overnight and into this morning. Global concern over China’s dim economic outlook, fueled further by the People’s Bank of China’s decision to cut interest rates earlier this week, is severely depressing Antipodean currencies. Commodity prices, a main driver of AUD rates, are down largely across the board as well.
