Dollar stumbles as Trump’s lawyer confesses
Upbeat rhetoric following the latest Brexit summit, especially Brexit Minister Dominic Raab being confident of an end of October completion, meant Sterling sentiment improved. The Pound also benefited from short covering (buying Sterling to close bets that the price would fall) an improvement in global risk appetite and significant gains in oil prices. Domestic political tensions and pending government guidance on how to prepare for any no-deal Brexit mean that the Pound’s position is still fragile.
Sterling pushed back to highs around 1.2935 against the Dollar before correcting to near 1.2870. The Euro did advance, but again failed to break past 1.1110 and fell back to near 1.1135 against the Pound. Brexit negotiations continue and a technical document discussing 40 areas is due today.
The Euro hit the 1.1600 mark vs the Dollar yesterday, but a late weakening of Italian bonds helped the Euro slip away from those daily highs. Another factor that weakened the Euro slightly was the reports that Chancellor Merkel was more concerned about securing the EU Commission Presidency than Weidmann being ECB head.
Yesterday the August German ZEW survey was positive, as was the manufacturing index which helped a rise in the Euro. However the services measure was down, which reflects the disappointing year EU economic growth has had.
Today finally offers some economic data in the Eurozone, with the ECB’s minutes, EU preliminary Consumer Confidence and preliminary August Markit PMI all due. The 12.30 release of the ECB’s minutes will provide the most volatility. The PMIs are not expected to provide any shocks and post rises, but still be at a lower level than they were this time last year.
The recent US Dollar sell-off intensified yesterday after two former campaign advisers of US President Donald Trump were found guilty on a range of charges. Michael Cohen’s attorney, Lanny Davis, said that Cohen has knowledge of a Russian conspiracy linked to Trump’s election campaign.
The Fed Minutes was where the big risk was over in the US, but in the end little volatility was seen with the central bank maintaining its outlook for gradual rate hikes, while being mindful of various downside risks that could derail the normalization timeline, with US administration trade policy one of those risks.
The market is also reserved ahead of Friday’s Powell speech in Jackson Hole on the subject of monetary policy in a changing economy.
Looking at today’s calendar, we see US initial jobless claims, US manufacturing PMIs and US new home sales.
Data to watch
07:30 EUR Markit PMI Composite (Aug)
07:30 EUR Markit Services PMI (Aug)
07:30 EUR Markit Manufacturing PMI (Aug)
08:00 EUR Markit Manufacturing PMI (Aug)
08:00 EUR Markit Services PMI (Aug)
08:00 EUR Markit PMI Composite (Aug)
11:30 EUR ECB Monetary Policy Meeting Accounts
12:30 USD Continuing Jobless Claims (Aug 10)
12:30 USD Initial Jobless Claims (Aug 17)
13:00 USD Housing Price Index (MoM) (Jun)
13:45 USD Markit PMI Composite (Aug)
13:45 USD Markit Services PMI (Aug)
14:00 USD New Home Sales (MoM) (Jul)