After a very brief rebound from its dreadful form last week, the dollar has once again started to depreciate. For most of the session the dollar index was continuing the positive move it began on Friday, but towards the end of the trading day it had fell back into negative territory. This poses questions on the strength of the dollar’s recent turnaround; and after falling back into the red yesterday, would suggest that sentiment is still weak.
Contributing to this decline is the lack of development in congress on the COVID-19 relief package. With the negotiations going on for over a week now, investors are becoming less optimistic that a conclusive agreement will be reached any time soon. Even the Speaker of the House, Nancy Pelosi, has noted she does not expect an agreement to be achieved this week.
As always, another contributing factor to the dollar’s decline is the US-China relationship. As these two superpowers continue to exchange blows, tensions on either side grow larger by the day. The latest move from President Trump to ban TikTok, a Chinese video sharing app, will not have pleased Beijing. One can only guess how exactly China will react.
Due to the lack of appetite on the USD front, just before this morning’s open, cable started trading back above the 1.31 handle (and seems to be holding). This is an improvement from yesterday, with GBPUSD opening at 1.3096, closing the day at 1.3057.
After a brief spell in the 1.17s, EURUSD is once again capitalising on USD weakness and has started the day above 1.18. Yesterday, EURUSD opened at 1.1796, slipping slightly over the course of the day, closing at 1.1765.
GBPEUR has had a sharp fall this morning, holding just above the 1.1060 level. Yesterday didn’t see much price action for the pair, opening at 1.1103, before closing the session at 1.1098.
On the data front we have a plethora of releases from several G10 nations. At 8:55 Composite and Services PMI’s from Germany missed expectations very slightly, but nonetheless posting a figure that is marginally better than last month’s reading. We also had Composite PMI from the Eurozone at 09:00 – beating forecasts and coming in at 54.9 – again, this is a significant improvement from June’s 48.5. Also, Composite PMI for the UK, released at 9:30, posted a figure of 56.5 – an improvement from last month’s reading and missing forecast by only 0.1%.
For the US today we have the weekly ADP Employment Change figures being released early afternoon, followed by the ISM Non-Manufacturing PMI. Both figures will be closely watched, but it is the labour data that will be the most telling and influential.
