USD Deepens Its September Slide as It Drops to New Two-Month Lows

Sept. 20, 2018 (Western Union Business Solutions) – The U.S. dollar crashed to new lows as it deepened a September slide. The mostly weaker dollar slipped to fresh multiweek lows against the euro and Canadian dollar and fell to its weakest in two months against the data-powered British pound. An easing in global risks has kicked away a leg of support for the safer U.S. currency. While the U.S. and China stepped up their trade quarrel this week, the modest tariff increases were considered less draconian than expected and thus likely to have only a muted impact on global growth. Sterling soared more than a percent to mid-July highs after unexpectedly bullish U.K. retail sales depicted a resilient consumer, a positive sign for third quarter growth. Oil near recent multimonth peaks above $71 buoyed Canada’s commodity dollar. Also in focus today: central bank decisions in Norway, Switzerland and South Africa, an EU Brexit summit, and a slew of U.S. data.

 

GBP

 

Sterling soared to 2 ½ month peaks on a somewhat rare of late double-dose of optimism on Brexit and the U.K. economy. Retails sales unexpectedly rose with a 0.3% increase in August while the July reading got upgraded to nearly 1%. The spending splurge bodes well for faster growth during the third quarter. Meanwhile, Brexit parties are meeting today with hope intact for officials to move toward a trade deal before long.

 

CAD

 

Canada’s dollar flirted with three-month highs on the back of buoyant oil markets and the flimsy greenback. Oil topped $71, one of the highest levels in two months. Mix in cautious optimism about Nafta negotiations in Washington and solid Canadian data this week making a stronger case for an imminent rise in area borrowing rates and it’s no surprise to see the loonie gain traction. Those gains will be tested Friday in northern numbers on inflation and retail sales. A solid set of data, which is generally on the cards, would all but cement a rate hike to 1.75% from 1.50% on Oct. 24, the next Bank of Canada meeting.

 

AUD

 

The Aussie dollar appreciated to three-week peaks as global risks abated as markets took the latest match of tariff tennis between Washington and Beijing in stride. Antipodean currencies also basked in the afterglow of stronger than expected second quarter growth from neighboring New Zealand whose economy expanded at a 1% rate, an amount two times faster than the 0.5% pace during the first quarter. Still, tepid fundamentals point to longer run headwinds on both the Aussie and kiwi on the perception that their respective central banks are a long way from raising interest rates from historic lows.

 

USD

 

Stronger than expected U.S. data helped to slow the dollar’s bleeding. Weekly jobless claims unexpectedly improved, hitting a new low of 201,000 the healthiest since the late 1960s. The Philly Fed index showed faster than expected growth. The numbers continued to bark a familiar refrain of a strong U.S. economy that could lead the Fed to accelerate the pace of rate hikes which is positive for the buck and could help to slow its weekslong descent.

 

EUR

 

The euro pushed to 2 ½ month highs as the descended to new lows. The euro largely benefited from the greenback’s retreat while it enjoyed spillover support from sterling strength against the buck. While the euro has inched higher over recent days, it’s struggled to close above key thresholds. Nevertheless, the euro’s power play today bodes better for its technical prospects.

 

NOK

 

Norway’s krone fell broadly, even against the weaker greenback, after the nation’s central bank deployed a ‘dovish’ rate hike. The Norges Bank raised its benchmark rate to 0.75% from 0.50% but it sketched a slower pace of rate increases in the months ahead which disappointed Norwegian bulls. Consequently, the greenback rebounded above 7-week lows hit this week.


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