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US Dollar bounces on trade tension

Published: Tuesday 24 July 2018

  • Confederation of British Industry industrial trends forecast to be weaker
  • Purchasing Managers’ Index data awaited from EU
  • Sterling at the mercy of world politics, not data
  • New Zealand Dollar buyers, beware
​​By David Johnson

US Dollar strengthens again on trade tensions
The US Dollar strengthened yesterday, despite US existing home sales numbers falling short of expectations. Rising tensions around the world over trade; almost exclusively related to the US President’s propensity to make policy a-la-Tweet, are behind the USD’s strength. Investors head for the safety of US treasuries when global tensions are high and that appears to be the pattern here. Having Iran rattling its sabres is also part of the problem. The forecast for this afternoon’s US data (manufacturing and service sector Purchasing Managers’ Indices) are quite mixed, so we will still be watching trade wars and threats and counter threat for clues as to the US Dollar’s direction.
Sterling at the mercy of world politics, not data
Sterling starts the day at around $1.31 and €1.12 and the Confederation of British Industry (CBI) industrial trends survey is the only piece of tier one data to focus on. That is forecast to show a slowdown compared to June. However, politics will trump (no pun intended) anything statistical right now. So the Prime Minister and all her loyal cabinet team plus EU speakers will hold sway over the value of the Pound and Euro.

Euro likely to weaken on latest data
There is some European data today, though. We will get Purchasing Managers’ Indices (PMI) on the manufacturing and service sectors, plus a composite index this morning. All are forecast to be a tad weaker than June’s data and the Euro is likely to react negatively to that.
New Zealand Dollar buyers, beware
Once the EU and US data releases are out of the way, we will see trade and employment data for New Zealand. A small growth in employment and potentially a small drop in the unemployment rate to 4.4% are possibilities, so New Zealand Dollar strength before dawn is also possible. Beware if you are a New Zealand Dollar buyer.

Cool running
And, as we swelter in the EU-wide heatwave, this story will cool you down. K2 is the second highest peak in the world and roughly 25% of those who climb it perish in the attempt. So imagine climbing it and then ski-ing back down the 28,000 feet to the base. Well, that’s what Andrzej Bargiel did last Saturday. It was his second attempt and, having completed the challenge, he is said to have commented that he doesn’t need to come back. With the odds stacked that heavily against you, I don’t blame you, Andrzej.
A capital idea
Mrs Banks was called to jury service in Midwest America but she asked to be excused because she didn't believe in capital punishment and didn't want her personal thoughts to prevent the trial from running its proper course.

The public defender liked her thoughtfulness and quiet calm, and tried to convince her that she was appropriate to serve on the jury.

"Madam," he explained, "this is not a murder trial! It's a simple civil lawsuit. A wife is bringing this case against her husband because he gambled away the $15,000 he had promised to use to remodel the kitchen for her birthday."

"Well, okay," agreed Mrs Banks, "I'll serve on the jury. And maybe I was a little hasty about the capital punishment thing."

Today's Major Economic Releases

Market BST Data/Event Previous Expected
EUR 09:00 EU: Flash Manufacturing Purchasing Managers' Index 54.9 54.7
EUR 09:00 EU: Services Purchasing Managers' Index 55.2 55.0
GBP 11:00 UK: Confederation of British Industry Industrial Order Expectations 13 8
USD 14:45 US: Flash Manufacturing Purchasing Managers' Index 55.4 55.1
USD 14:45 US: Flash Services Purchasing Managers' Index 56.5 56.5
NZD 23:45 New Zealand: Trade Balance 294m 200m

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