Yesterday, this report posed the question as to whether the dollar’s newly found vigour was a ‘bounce back’ or a ‘pause’ from its recent abysmal form – and it looks like it was the latter. The dollar index has now tested 4-day lows (93.20) and any upside appears to be capped at 94.00. A significant contributor to the buck’s sell-off will be the continued deadlock in the senate over another stimulus package. Despite the better than expected US inflation report yesterday, the lack of consensus and political uncertainty has proved to be the major driver of USD downside. The importance of this issue cannot be overlooked, even FED members Eric Rosengren, Mary Daley and Robert Kaplan have explicitly noted that now is the appropriate time to make decisive fiscal action. President Trump yesterday accused congressional Democrats of not wanting to negotiate and the blame-game between the two parties will likely continue into next week.
GBPUSD opened the session yesterday at 1.3036, depreciating over the course of the day, testing the lower 1.30 barrier. At the close the pair managed to finish the day just above the open at 1.3045. Overnight the USD weakness consequently has enabled cable to test the 1.31 level and is maintaining itself comfortably above 1.3050.
After falling into the 1.17’s the greenbacks weakness has enabled EURUSD to open above 1.18 this morning. Yesterday, the pair opened at 1.1734, only to press on throughout the day and close at 1.1795. Shortly after the close the pair spiked and broke the 1.18 barrier.
The Euro has also managed to show some resilience against the pound, with GBPEUR now firmly back in the 1.10 range. Yesterday the pair opened at 1.1111, only to depreciate over the session, finally closing at 1.1060.
On the data front, this morning we had the final German Inflation Rate for July, remaining unchanged at -0.1%. Later today at 13:30 we have the weekly jobless report – Continuing Jobless Claims are forecasted at 15898k, which would be an improvement from the previous 16107k. Initial Jobless Claims are also forecasted better than last week, expected to come in at 1120k.
Tomorrow the focus will remain on the US, as in the afternoon we have both Retail Sales for July and the Michigan Consumer Sentiment for August. But before that, at 10:00, we have the second estimate of Q2 GDP Growth Rate for the Eurozone.