Dollar Weakens amidst US Economic Uncertainties
The US dollar lost ground against its major trading partners early Tuesday, except for a small rebound against the Canadian dollar, ahead of the first consumer sentiment data for August.
FX analysts said they think the dollar can stay quite well bid for the rest of the year as the Fed takes the funds rate to 3.25/3.50%, dollar stability at the highs could see renewed interest in this high-yield EM local currency bond space.
Markets and analysts are on alert for signs of a further economic slowdown after a second straight decline in gross domestic product growth in Q2, but last week’s extremely upbeat employment report alleviated some of those concerns. READ: U.S Dollar Weakens Against Major Trading Partners
The next guidepost for markets and the Federal Reserve will be consumer inflation data for July scheduled for release Wednesday. A quick summary of foreign exchange activity heading into Tuesday shows that USDEUR rose to 1.0227 from 1.0195 at the Monday US close and 1.0188 at the same point Monday morning.
There were no EU data released overnight. The next European Central Bank meeting is scheduled for Sept. 9 where a 50 basis point rate increase is expected. GBPUSD rose to 1.2109 from 1.2080 at the Monday US close and was slightly above the 1.2105 level at the same time Monday morning.
The UK BRC rate sales monitor rose unexpectedly in July, according to data released earlier Tuesday, as excessive heat pushed sales of seasonal items. The Bank of England meets next on Sept. 15 after a 50 basis point rate increase last week.
USDJPY fell to 134.9047 from 135.0454 at the Monday US close but was marginally above the 134.6741 level at the same time Monday morning. The pace of Japanese machine tool orders slowed in July according to data released overnight. Unlike other major central banks, the Bank of Japan is expected to maintain its accommodative monetary policy stance at its next meeting on Sept. 21-22.
USDCAD rose to 1.2861 from 1.2857 at the Monday US close but was down sharply from 1.2903 at the same point Monday morning. There are no Canadian data on Tuesday’s schedule. The Bank of Canada’s monetary policy committee meets next on Sept. 7. # Dollar Weakens amidst US Economic Uncertainties
