The Dollar is on the front foot this morning after a day of choppy trading yesterday.
Overview
FX movements over the last few weeks have been relatively slight, but the Buck has largely retained its strength and not lost any substantial ground against any currency save for the Japanese Yen after currency authorities in the island nation likely intervened on behalf of its currency earlier this month. Commodity-based currencies, in particular, are facing losses this morning as iron ore and oil prices declined heavily throughout yesterday’s session and into today.
The US is still reeling from sitting President Joe Biden’s announcement on Sunday that he would be standing down from the 2024 election. Since then Vice President Kamala Harris has now amassed enough delegates to clinch the Democratic Party’s nomination for President. Her record-breaking fundraising haul of $81 million in 24 hours may or may not have enough impact to change betting odds on this election, but it has certainly made the GOP consider her candidacy as more legitimate than they may have previously thought. This is one explanation for the bid the Dollar has caught this morning – a potential Harris presidency rather than a potential Trump presidency is more likely to feature an agenda more focused on domestic pursuits and result in a stronger US Dollar, rather than Trump and his runningmate JD Vance’s espoused preference for a weaker Dollar to favorably swing exports.
In a dearth of hard data this morning, risk markets are on the back foot after China cut a key short-term interest rate Sunday night. The data calendar does pick up steam later this week, with the Bank of Canada as the next central bank to make an interest rate decision tomorrow morning.
What to Watch Today…
- Bank of Canada Interest Rate Decision, Wednesday
- US GDP Q2 Advance, Thursday 8:30 AM
- US PCE Price Index, Friday 8:30 AM
- Monex USA Online is always open.
EUR ⇓
The single currency accelerated into losses this morning after managing to hold steady during yesterday’s session after traders picked back up on bets that the European Central Bank will cut its key interest rate once again in September. Eurozone PMIs are due out tomorrow morning, largely expected to barely stay in positive territory – the economic bloc has been on the verge of a recession for several quarters, and this month’s readings are no exception. At the time of writing, traders are all but guaranteeing that the ECB will cut interest rates by 25 basis points on September 12 and expect 45 basis points of cuts this calendar year.
AUD ⇓
Once again the Australian Dollar is one of the biggest losers on the G10 board as investors signal concern over demand from China and iron ore prices continue to slide. China’s move to cut its key short-term interest rate for the first time in nearly a year is showing traders that the world’s second-largest economy may be in more chaos than political leaders are willing to indicate, and the nation’s prolonged real estate market slide could potentially be weighing on demand even more than previously thought. Traders are also beginning to unwind larger positions shorting the Japanese Yen, impacting regional currencies in a major way.
