The dollar is gaining off of global concern regarding the Turkish economy as the lira hits new record lows. A better-than-expected U.S. CPI is also helping boost the greenback slightly. However, USD is falling against the Canadian dollar, which saw better-than-expected employment figures for July.
Waking up to headlines about the Eurozone and a contagion sounds like we might be in the middle of an apocalyptic movie, but this contamination – or fear of – is more of the economic sort.
The economic situation in Turkey turned worse as diplomatic talks in Washington, D.C. failed and the lira reached as low as 6.3005 against the U.S. dollar. Reports that the European Central Bank is concerned about the exposure other European banks have to Turkey spread the idea of a contagion risk in the Eurozone.
Investors’ and analysts’ concerns were not calmed as Turkish President Recep Tayyip Erdogan publicly addressed the situation Friday morning, saying his country would not be pressured by economic hitmen – referring to the sanctions imposed by the U.S. trying to force Turkey to release a detained American pastor.
The lira climbed up slightly from the record lows then got knocked down by a Trump tweet.
Trump said he authorized the doubling of steel and aluminum tariffs to 50% and 20%, respectively, for Turkey. “Our relations with Turkey are not good at this time!” he added.
USD/TRY is climbing higher by the minute above 6.55.
The EUR/USD pair was also impacted by the Eurozone concern, dropping from the lows of 1.153 to 1.145 Friday morning. President Trump’s tweet then took the pair lower to 1.141.
Dollar’s strength boosted by CPI
The consumer price index for July came out better than expected, helping an already-strong dollar to gain further against its peers.
The CPI excluding food and energy grew 2.4%, compared to the 2.3% expected. The dollar was able to make the most gains against the euro, but the pound is still benefiting from Q2 GDP numbers that met expectations, signaling that the U.K. economy isn’t too weak to handle the recent rate increase.
GBP/USD fell as low as 1.275 and has regained 1.277.
The better CPI adds more evidence for the case that rates should be hiked in September.
Canadian employment fights strong USD
The USD/CAD pair was on its way back up to highs last seen in July, but the better-than-expected employment numbers out of the Great White North brought down the U.S. dollar.
USD/CAD hit 1.312 before being knocked down closer to 1.307.
The Canadian unemployment rate for July was 5.8%, down from expectations of 5.9%. the net change in employment, or the amount of jobs added in July, far outpaced expectations of 17K jobs, coming out at 54.1K jobs.