What can you offer me?
Some dollars, perhaps?
USD walking into the Federal Open Market Committee (FOMC) meeting with whatever the opposite of “a spring in your step” is. There is a 0% chance of an interest-rate hike, according to World Interest Rate Probability data from Bloomberg. So what are investors looking for? On the policy front, traders will be looking for details around when the Fed will begin to unwind its massive balance sheet.
Tone may be more of a driver for USD price action. Inflation has now hit below expectations for four months in a row, belying the Fed’s assertion that weakness at the start of the year was a temporary dip. There is a strong risk of the FOMC striking a more cautious tone, which would weigh on a languid US dollar.
Politics continue to weigh on the greenback as the Russia probe expands and mounting anxiety about hitting another debt ceiling in October.
Canadian dollar is at a 14-month high against the USD, extending strength from yesterday’s wholesale trade sales figures which were stronger than expected.
“Euphoric” probably isn’t the first word that springs to mind to describe German businesses, but today it is.
July’s ifo Business climate index hit an all-time high for the third month in a row. Describing sentiment as “euphoric” amongst the 7,000 firms surveyed, the index noted that strength was broad-based across all sectors.
Manufacturing improved further as the sector hit a new record high. Manufacturers expressed greater optimism in the near-term outlook. However, the outlook for retailers was not so positive. Retailing fell five points as firms in that sector were not only less satisfied with their current business situation, but also less confident about the short-term business outlook.
Moderation in private consumption seems to be a less important driver as the German economy continues to rely heavily on external demand.
Back on the map
Greece is back on the map – or at least their longer-dated bonds are.
After a three-year hiatus, Athens will issue new five-year bonds to raise funds. This is a significant step in decreasing their reliance on bailout funds which will continue to run until 2018.
It is the government’s first attempt to break its reliance on bailout loans since it accepted a third rescue package two years ago (read more here).
European Economic Commissioner Pierre Moscovici said this is a positive signal and Greece is at a turning point: “confidence in Greece is really coming back, but we need to continue the good work.” While he also expressed confidence that Greece will successfully end its bailout program as scheduled next year, he said Greece must stick with reform efforts and implement austerity measures required by creditors.
EURUSD: Euro higher as Greece re-enters global financial markets and German business sentiment surges to all-time highs in July.
GBPUSD: Sterling higher versus the dollar, but gains have been tempered by higher than expected US consumer confidence survey.
AUDUSD: Aussie dollar bolstered by higher commodity prices and a broadly weaker US dollar.
USDCAD: Canadian dollar enjoying a weaker greenback, sitting at a 14-month high against the USD.
USDJPY: The yen had yielded as two new policymakers at the Bank of Japan said it would be premature to even talk about ending its massive monetary stimulus.