US Dollar Strengthens Ahead of Industrial Data Report
The US dollar rose against its major trading partners early Tuesday, except for a small decline versus the euro, ahead of a busy schedule of economic data releases, starting with retail sales for August and the New York Federal Reserve’s services reading for September.
In August, industrial production rose 0.8 percent after falling 0.9 percent in July, according to data released by Federal Reserves. Similarly, the output of manufacturing increased 0.9 percent in August after decreasing 0.7 percent during the previous month.
This pattern was due in part to a recovery in the index of motor vehicles and parts, which jumped nearly 10 percent in August after dropping roughly 9 percent in July. The index for manufacturing excluding motor vehicles and parts moved up 0.3 percent in August.
The index for mining climbed 0.8 percent, while the index for utilities was flat. At 103.1 percent of its 2017 average, total industrial production in August was the same as its year-earlier level.
Capacity utilization moved up to 78.0 percent in August, a rate that is 1.7 percentage points below its long-run (1972–2023) average.
The CME FedWatch tool current shows a 65% chance of a 50 basis point rate reduction being priced in for Wednesday’s Federal Open Market Committee meeting announcement from the current target range of 5.25% to 5.50%, and a 35% chance of a smaller 25 basis point rate reduction.
Federal Reserve officials remain in their ‘quiet period’ until after the conclusion of the two-day FOMC policy setting meeting. A quick summary of foreign exchange activity heading into Tuesday showed that USDEUR rose to 1.1134 from 1.1130 at the Monday US close and 1.1122 at the same time Monday morning.
Eurozone economic sentiment declined in September according to data released earlier Tuesday. European Central Bank policy board member Frank Elderson is scheduled to speak today. The next ECB meeting is scheduled for Oct. 17.
GBPUSD fell to 1.3210 from 1.3214 at the Monday US close but was still above a 1.3195 level at the same time Monday morning. There are no UK data on Tuesday’s schedule. The next Bank of England meeting is scheduled for Thursday, when no change in interest rates is expected.
USDJPY rose to 140.7110 from 140.7084 at the Monday US close and 140.0841 at the same time Monday morning.
Japanese business purchases of services rebounded more than expected in July after a June decline, data released overnight showed.
The next Bank of Japan meeting is scheduled for Thursday and Friday, with the policy announcement scheduled for release late Thursday evening in US time. No change in interest rates is expected.
USDCAD rose to 1.3595 from 1.3585 at the Monday US close and 1.3577 at the same time Monday morning. Canadian housing starts for August are due to be released, followed by Canadian consumer prices for August.
Bank of Canada Senior Deputy Governor Carolyn Rogers is scheduled to speak at 6:00 pm ET. The next Bank of Canada meeting is scheduled for Oct. 23. #US Dollar Strengthens Ahead of Industrial Data Report
