September 2019

Sept. 18, 2019 (Western Union Business Solutions)  – The  U.S. dollar added to its modest gains after the Fed cut interest rates as expected and offered an overall sanguine assessment of the U.S. economy.

 

The Fed shaved another quarter percentage point off the fed funds rate which it lowered to a range of 1.75% to 2.00%. The 7-3 vote in favor of today’s action showed that two officials dissented, preferring to keep policy unchanged, while the other wanted a bolder 50 basis point cut.

 

The Fed is now forecasting slightly quicker growth of around 2.2% this year. The central bank expects unemployment to stick near 50-year lows below 4%, while inflation went unrevised just below the Fed’s 2% goal.

 

Next up: the chairman’s press conference at the bottom of the hour.

 

Barring a material deterioration in U.S. data, the dollar should benefit from the view that the Fed may have fired its last cut for a while, dampening elevated market expectations of action again before year-end.

 

There will be just two more Fed decisions this year, on Oct. 30 and Dec. 11.

 

EUR 1.1038

JPY 108.25

GBP 1.2472
CAD 1.32 94


USA 

Sept. 12, 2019 (Western Union Business Solutions)  – The euro dropped then quickly popped after the European Central Bank delivered a strong dose of stimulus to try to revive the bloc’s morbid economy. The euro’s loss was the greenback’s gain as it rose against a basket of rivals. The yen edged up from six-week lows as the ECB’s action pushed down Treasury yields. Sterling and the Canadian dollar were little changed. The ECB deployed a dovish arsenal of measures to revive growth and inflation as it cut a key interest rate to historic lows, restarted QE bond buying and vowed to keep policy at present or lower levels essentially until the cows come home. The ECB cut the deposit rate to fresh all-time lows of -0.5% from -0.4%, and vowed not to increase it until inflation, now at 1%, ‘robustly’ converges toward its near 2% goal. By beefing up policy with an open-ended commitment, the ECB excited euro bears who dumped the single currency.

ECB

The ECB cut a key rate further below zero, while it revived its QE bond buying program and reinforced its forward guidance to indicate that higher rates were off the table until stubbornly low inflation rises ‘robustly’ toward its goal of just below 2%. QE is set to resume at €20 billion a month starting in November and continue indefinitely. The open-ended nature of stimulus was read as decidedly dovish and negative for the euro.

JPY

The yen hit new six-week lows overnight only to stabilize after the ECB delivered a solid jolt of stimulus that put downward pressure on Treasury yields, a key driver of USDJPY. The yen has fallen out of favor amid de-escalating trade tensions between the U.S. and China.

GBP

Sterling kept to a range as the Brexit drama eased a bit with Parliament on a five-week break until mid-October. Nevertheless, the Brexit situation remains fluid after a court this week ruled that Prime Minister Boris Johnson’s decision to suspend Parliament was ‘unlawful.’ The legal battle over Brexit looks set to play out over the coming days and weeks. Sterling continues to hold above multiyear lows as the latest developments suggested a somewhat reduced risk of a disorderly Brexit next month.

AUD

A softening in the U.S.-China trade war allowed the Aussie dollar to climb to six-week peaks. The neighboring kiwi dollar neared a one-month high. In a gesture of goodwill, President Trump delayed by a couple weeks to mid-October the implementation of higher tariffs on China. Australia and New Zealand have a heightened sensitivity to all things China, the destination for a significant portion of their resource exports.

CAD

Canada’s dollar slumped to lows for the week, weighed down by weaker oil markets. The price of oil slipped below $55, the lowest in more than a week. Consequently, USDCAD recovered from six-week lows hit earlier this week. Broad based strength in the greenback has also left the Canadian currency a bit vulnerable. A dovish ECB policy decision today, coupled with signs of a resilient U.S. economy, buoyed the greenback.

 

 

Sept. 5, 2019 (Western Union Business Solutions)  – Easing global political worries shift market to risk on mode

-             USD down 3% versus GBP in 48 hours

-             Big data day ahead for the US

-             Rising oil prices give welcome boost for the Canadian Dollar

Easing global political worries see safe haven sell off, including the US Dollar!

Market sentiment has improved as US-China trade talks look set to resume next month. In addition, easing global political worries from Hong Kong, Italy and the UK helped boost risk appetite. Global equities rallied along with riskier assets, emerging market currencies and oil prices.

Reports that Hong Kong withdrew the extradition bill, that has triggered months of protests and unrest, was cheered by investors. In Italy, a new coalition government was formed which gave a welcome boost to the Euro. While in the UK, MPs successfully passed a draft law to stop a potentially chaotic no-deal Brexit in October. China’s yuan and the closely linked Australian and New Zealand dollars appreciated on the news. The Japanese Yen and Swiss Franc, which draw in safe-haven demand in times of geopolitical stress, depreciated, as traders unwound these safer positions and sought out riskier high yielding assets.

The US Dollar index, which measure the strength of the dollar against a basket of currencies, slid for a second straight session, experiencing its biggest daily fall in two weeks.

GBP

In the last 48 hours, Sterling has recovered almost 3% against the Dollar. This rally occurred after law makers voted to force the Prime Minister to seek a three-month delay to Brexit if, he fails to secure a transition agreement with the EU.

Although a no-deal Brexit is still on the table, the likelihood of that has reduced dramatically. Combined with USD weakness, the British Pound has managed to record its biggest 1-day gain since March. A delay to Brexit until 2020 and a subsequent October 19 election could see more gains for GBP although further upside past 1.30 could be limited given the uncertainty that elections can create.

Big U.S. Data Day Ahead

We have a multitude of data out tomorrow for the US. Starting with Jobs data at 8:30am (EST) the market will be keeping a close eye these for any hint towards Friday’s official jobs report. Later this morning we then have non-manufacturing PMI.

US stocks recovered over night thanks to the fact US China talks are now set to resume in October. As mentioned earlier this has seen a sell off safe haven assets including the US Dollar and subsequently the Dollar begins the day from behind. Any surprise to the downside for todays data releases could accelerate losses for the day, especially against the emerging market currencies.