With today’s economic calendar lacking important data, major currencies were trading sideways during European trading hours, while market watchers were weighing the damage from the life-threatening tropical storm Harvey which forced the closure of the Texas oil industry on Monday. However, in the coming days, forex markets will be on the receiving end of important data releases from major economies.
The dollar struggled to recover from the 2-½-year lows it recorded against its rivals during early Asian session after the Fed Chief Janet Yellen avoided commenting on future monetary policy plans on Friday at the Jackson Hole conference. Instead, she sounded more dovish when she supported that any adjustments on financial rules should be "modest". With the political mess in the background and the US President currently dealing with the disastrous effects of the thunderstorm Harvey in Texas, investors will also keep a close eye on data releases out of the country in the following days. Particularly, releases will include an update on second quarter GDP on Wednesday, PCE figures, and housing numbers on Thursday, while on Friday the widely expected non-farm payrolls will offer clues on labor conditions and likely affect the Fed’s take on the monetary policy outlook.
Moreover, NAFTA members are expected to launch a second round of talks in Mexico City on Friday, following Trump’s renewed threat on Sunday to terminate the trade deal. Specifically, Trump characterized the deal as the "worst trade deal made ever" questioning whether the 23-year old agreement should end.
Meanwhile, the Bureau of Economic analysis published data on the goods trade balance while the US Census Bureau released initial figures on wholesale inventories for the month of July. According to the numbers, the goods trade deficit came in higher than expected at $65.10bn compared to the $64.50bn that was expected and the $64.01bn seen in the previous month. Wholesale inventories also weakened in the aforementioned month based on preliminary estimates but came in above expectations. Specifically, they grew by 0.4%, below June’s mark of 0.7% but above the forecasted 0.2%.
The dollar index, which gauges the strength of the dollar against a trade-weighted basket of major currencies, traded flat at 92.34, slightly above the 15-month low of 92.27 reached earlier on Monday.
Dollar/yen rebounded to 109.21, recovering from losses made earlier when the Japanese government maintained its upbeat view on country’s economic outlook. Particularly, the Cabinet office stated that business spending, exports, and output were "picking up" while it also said that private consumption was growing moderately, signaling a solid recovery.
Versus the safe-haven swissie, the dollar touched a one-month low of 0.9525 during early European trading hours. However, it managed to climb to 0.9543 afterwards.
The euro was moving sideways at $1.1932 after it hit a 2-½-year high of $1.1958 in the early Asian session, following ECB Chief Draghi’s optimism on the Eurozone’s recovery expressed at the Jackson Hole symposium last week. In addition, the euro was boosted as Draghi did not express concerns about the block’s strengthening currency. Now, investors will wait for further economic releases out of the Eurozone including the unemployment rate and inflation before the ECB policymakers gather to decide on interest rates next week.
In the UK, the opposition Labour party stated on Sunday that it would make efforts to keep the UK in the single market during a transitional period after Brexit. Furthermore, British officials are meeting this week in Brussels to negotiate post-Brexit regulations as the European Union refuses to discuss on the topic unless the UK accepts to pay an exit bill related to its previous commitments. The EU representative Michael Barnier and the UK’s David Davis, which are the two chief Brexit negotiators, are meeting today ahead of technical level meetings on Tuesday and Wednesday which will cover other exit issues including expatriate rights and the so called divorce bill.
Cable managed to reverse earlier losses, rising to 1.2920 in the late European session.
The commodity-linked loonie edged up against its US cousin as the catastrophic thunderstorm Harvey, which is the strongest seen in more than 50 years, hit the Texas Gulf of Mexico coast which is the main base of US energy production – producing half of the oil output – and forced major refineries in the area to shut down their operations. So far, a quarter of the oil production was affected at the US Gulf of Mexico, driving gasoline prices up by 7% to more than a two-year high. Dollar/loonie was last seen at 1.2475.
Regarding oil prices, WTI crude dropped by 1.13% to $46.74 per barrel while Brent fell by 0.54% to $51.87.
Gold was last trading above the $1,300 an ounce mark at $1,307, reaching its highest since early November when Donald Trump won the US presidency.
