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September 2017

US Dollar weakened by storms and geopolitics

Published: Friday 08 September 2017

  • US Dollar weakened by storms and geopolitics
  • Euro boosted by European Central Bank comments
  • UK data expected to boost Pound
By David Johnson
The US Dollar is showing signs of weakness as traders continue to try to second-guess the US versus North Korea situation and the current and future costs of those terrible storms sweeping through the Caribbean and Eastern Seaboard of the US. The scenes of obliteration shown on the news reports are heart rending. 
The Dollar’s decline is a short term thing at the moment, but many analysts are already talking about an extended Dollar bear market; i.e. a period of weakness in the US Currency. Other economies are outstripping US growth and these devastating storms will set back large tracts of the US economy for some time to come. That said, the construction boom that will follow the damage will bring some level of growth to counter the loss of day to day business. There is not a lot on the US data front today, so further weakness may well ensue. Whatever the outcome, there is an increasing chance the Federal Reserve will refuse to move the US base rate and Quantitative Easing (QE) budget for the rest of 2017.
The European Central Bank (ECB) left their base rate on hold when they met yesterday and the only really notable part of the ECB’s statement was the fact that they are considering changing their QE programme at their October meeting. That’s not exactly earth shattering, is it, but it was enough to boost the Euro which gained against the retreating USD and improved against the Pound to a lesser degree.
On the Sterling front, we get manufacturing and industrial data today which ought to be very positive, in line with recent business sentiment surveys. The construction output data is expected to be less positive, so perhaps there will be little overall change in the Pound. But we are expecting a good reduction in the trade deficit, so that would be positive for the GBP. Volatile is perhaps the word of the day for the poor old Pound.
We heard overnight that Chinese exports faltered last month whilst imports remained strong. That sent a chill through the markets and caused further USD weakness. We also hear that China’s reserves grew very healthily in August. It starts to explain why they are investing so heavily across Africa and Asia.
This afternoon brings Canadian employment data and that should be positive, so be ready for Canadian Dollar strength if the forecasters are right.
And then it is the weekend. Phew! It has been a busy week in the markets but a tragic one for those in the Caribbean and Southern Americans. And we are seeing breaking news that a massive 8.4 magnitude earthquake has hit Mexico, triggering a Tsunami. Stay safe all of you.
"If you want to know what a man's like, take a good look at how he treats his inferiors, not his equals."
J.K. Rowling

Today's Major Economic Releases

Market BST Data/Event Previous Expected
AUD 09:30 Reserve Bank of Australia Governor Lowe Speaks    
GBP 09:30 UK: Manufacturing Production 0.0% 0.3%
GBP 09:30 UK: Goods Trade Balance -12.7b -11.9b
GBP 09:30 UK: Construction Output -0.1% -0.2%
GBP 09:30 UK: Industrial Production 0.5% 0.2%
GBP 13:00 UK: NIESR Gross Domestic Product Estimate 0.2% 0.2%
CAD 13:30 Canada: Employment Change 10.9k 17.8k
CAD 13:30 Canada: Unemployment Rate 6.3% 6.3%
CAD 13:30 Canada: Capactity Utilization Rate 83.3% 84.9%

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