Trump has killed the US dollar bulls, earliest respite on 7 September
By Arnaud Masset
Currency investors remain bearish on the USD, as President Donald Trump has slain the few, holdout dollar-bulls. As his administration veers from one political debacle to the next, the greenback has sunk steadily. The dollar index fell yesterday 0.70% to 91.64, its lowest since January 2015.
No recovery is expected ahead of the 7 September meeting of the European Central Bank’s monetary policy council. If ECB President Mario Draghi comes off more dovish than expected, and if US economic data are positive, there could be a moderate dollar rally.
A raft of economic data are expected shortly. Today comes the National Employment Report from the ADP Research Institute (185k expected, 178k prior) and the government’s second estimate of Q2 GDP, expected at 2.7% above Q1 on an annualized basis. On Thursday, releases will come for personal income and spending, both expected to have improved in July over June 0.3% and 0.4% respectively. Also on Thursday comes US Federal Reserve’s favourite measure of inflation, core personal consumption expenditures, which should have eased further in July at 1.4% year on year. Friday will see July’s Non-Farm Payroll data (180k expected, compared to 205k in June).
Pound sterling will weaken against EUR and USD
By Peter Rosenstreich
Although the pound has recovered slightly against the USD and the Euro, it is not a sustainable course. The Bank of England remains dovish: the central bank will not tighten money until there is clear political direction around Brexit.
One key indicator will come in October, as the major parties hold their conferences. Investors will also be watching German elections. A decisive victory by Chancellor Merkel’s Christian Democrats will boost the Euro. She and France’s President Emmanuel Macron intend to cooperate in advancing the European Union’s financial integration.
GBP/USD is consolidating around 1.30, while EUR/GBP has no real resistance till 0.9415. EUR/USD should top 1.20, and favourable European economic/political conditions suggest further upside for the pair.