After an abysmal performance last week the US dollar finally showed some signs of recovery. The dollar index was up by 0.3% yesterday, hitting a 5-week high and marking its first back to back daily gain since June.
After a brief spell above 1.31, GBPUSD has retracted, opening yesterday at 1.3077 – and with little price action during the day, closed the session at 1.3054.
GBPEUR also traded with little movement over the course of the day, opening at 1.1120, before closing off at 1.1109.
Similarly to cable, EURUSD has pushed back from its 2-year high of 1.19 last week, opening yesterday at 1.1759, before closing at 1.1750
Despite seeing some resilience in the dollar, the uncertainty surrounding the pending US fiscal package still weighs heavy on US economy. If negotiations continue to lack any definitive outcome, millions of unemployed Americans will not receive extra help from the government, risking a drop in consumption, thus further damaging the economy.
Tomorrow will prove interesting for the dollar as we have several data releases from the US. To kick off the day, we have MBA Mortgage Applications, followed by the ADP Employment Change, Balance of Trade, ISM Non-Manufacturing, and finally a speech from FED member Loretta Mester.
It is important to note that we also have the release of Non-farm Payrolls on Friday. Experts are expecting another month of multi-million job gains as people are beginning to return to work. If this comes to fruition, we can expect an improvement in the dollar. However, given the recent spike in COVID-19 cases in June, a negative reading cannot be ruled out.
As for yesterday, we had manufacturing PMI’s from the UK, Eurozone, and the US. The UK’s final reading for July was released at 53.3 – just shy of its 53.6 forecast but marginally better than June’s 47.4. The Eurozone PMI beat expectations by 0.7, coming in at 51.8. From the US we had both the Markit and ISM manufacturing PMIs; Markit PMI missed forecast slightly by coming in at 50.9. ISM on the other hand, beat expectations, with the final reading at 54.2.
During the night we had the latest interest rate decision from the RBA – leaving rates unchanged at 0.25%. Following up tonight we have the Q2 Employment Change and Unemployment Rate. It will be interesting to see how the labour market performed in New Zealand as they were one of the first territories to lift lockdown restrictions. Their performance could be a solid indicator as to how other countries, when able to do so, will fair when COVID becomes less of a threat and ‘normality’ begins to resume.