September 6 2018

Sept. 6, 2018 (Western Union Business Solutions) – The U.S. dollar retreated from multiweek highs as big rivals from Europe staged a recovery. The dollar softened below two-week highs and surrendered gains after powering this week to its highest in two years versus counterparts from Australia and South Africa. The recent rout in emerging markets subsided, allowing the Mexican peso to stabilize above two-month lows. Headwinds on the euro and sterling have shown signs of abating. Italy appears less inclined to ramp up deficit spending, a stance that has eased pressure on the nation’s bond yields, making government borrowing more affordable. In Britain, the latest headlines on Brexit have sounded cautiously optimistic about the nation eventually striking a trade agreement with the EU that would allow it to avoid a potentially economy-damaging exit from the bloc. Downside for the U.S. currency appears limited given ongoing trade war concerns. U.S. numbers today on jobs and services growth could potentially foreshadow tomorrow’s nonfarm payrolls report.




Sterling catapulted above two-week lows on reports that Britain and Germany had softened their demands for a Brexit deal for the former. While Germany reportedly refuted the news, it gave nascent rise to hopes that Britain would eventually reach an uncertainty-reducing trade deal in time before its planned exit from the bloc in March 2019.




Canada’s dollar steadied above 6-week lows as it looked for direction from U.S.-Canada trade talks in Washington. The loonie registered little more than a yawn Wednesday after the Bank of Canada left interest rates at 1.50% as expected and issued a largely status quo statement that flagged higher rates and elevated uncertainties with respect to Nafta negotiations. The market currently sees a more than 50% likelihood of the BOC raising rates to 1.75% when it next meets on Oct. 24. But much should hinge on Nafta and coming data like Friday’s Canadian jobs report that’s forecast to show an uptick in unemployment to a still low 5.9% for August.




The euro rose above two-week lows as it largely shadowed sterling higher. Meanwhile, concerns about the indebted state of Italian finances have moderated on signs the new coalition government in Rome is reconsidering plans to blow out the budget with deficit spending. That’s allowed Italian government borrowing rates to decline. Upside traction may prove limited for the euro after German data disappointed and showed a surprise plunge of nearly 1% in industrial orders in July, evidence that trade war uncertainties have impacted the real economy.




The dollar favored session lows after mixed news on America’s job market. On the bright side, weekly jobless claims unexpectedly improved, hitting the lowest in nearly 50 years of 203,000. But another survey by payrolls firm ADP raised questions about the sustainability of the U.S. economy’s bull run. The ADP survey showed a big drop off in hiring in August to 163,000 from an increase of 219,000 in July. The latter report potentially foreshadows an underwhelming nonfarm payrolls jobs report Friday.