There has been bucket loads of data out of the past 24 hours, but not a whole lot of news. USD weakness remains the main theme in markets, while US equities and oil are marginally higher. US yields are unchanged.
The USD remained under downward pressure into month’s end, setting up what would be its fifth consecutive monthly loss and its longest losing streak since 2011. The DXY is down around 0.4% on the day, with loses concentrated against generally stronger European currencies. Overnight moves seemed more related to month-end flows than anything else although somewhat mixed US data against marginally better than expected European data played with the grain.
This all in the backdrop of persistent concerns over the Trump administration’s lack of policy progress and internal upheaval. The latest is the removal of communications director, Anthony Scaramucci, this morning, after just 10 days in the job. It plays to the point the Fed’s Fischer noted overnight that ‘uncertainty about the outlook for government policy in health care, regulation, taxes, and trade can cause firms to delay projects until the policy environment clarifies’, in speech notes he is scheduled to give in Brazil next Monday. The DXY US dollar index, at 92.9, is eyeing up May’s 2016 low around 92.0, a break of which would set up more downside. USD/JPY is probing lower, currently down 0.4% at around 110.30.
EUR/USD took another leg higher overnight, blasting through 1.1800 to trade at its highest level since early 2015. The pair opens this morning close to session highs up 0.7% at around 1.1830. GBP/USD rose on the EUR’s coattails sitting around 0.4% higher this morning not far from 1.3200.
EU inflation remained low in July. The headline rate was steady at 1.3%, while the core rate edged higher to 1.2% from 1.1%. So still well under the ECB’s goal of just under 2%, but enough to argue deflation risks have gone. Another small dip in the EU’s unemployment rate, to a fresh 8-year low, adds to that case. But there is no urgency for the ECB to alter its plans to, in the first instance, even discuss its QE tapering plans over coming months. EU Q2 GDP data is due out tonight.
Oil traded marginally lower for most of the night, before turning higher this morning. Brent crude currently sits up 0.2% at around $US52.60.
This set the tone for commodity currencies overnight, with NZD, AUD, and CAD all trading a touch lower against the USD before turning higher late in the session. Moves were relatively modest. NZD briefly dipped below 0.7470 before getting support from a softer USD. NZD/USD opens this morning nearly unchanged on the day at around 0.7510. NZD/EUR has dipped under 0.6350 and NZD/GBP under 0.5700 as European currencies strengthened.
AUD/USD was trading lower despite a circa 7% lift in iron ore prices, but has returned to around 0.8000 as the USD dipped and oil prices rose. Yesterday’s China’s PMI came in a touch under expectations, but close enough to suggest decent growth continues. NZD/AUD has been a near horizontal line overnight at around 0.9390.
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