The Greenback strengthens following liquidity issues in the money market
Monday 23 September, 2019
Daily Currency UpdateUSD - United States DollarThe U.S. dollar has increased 0.23 percent this morning, despite the Fed continuing to fix the shortage of daily U.S. dollar liquidity. It is not clear yet if the shortage was generated by bigger banks not willing to lend to smaller financial institutions due to a lack of quality of the collateral offered, or if U.S. dollar liquidity dried up because of corporate tax payments. The Fed is addressing this funding issue by injecting liquidity of up to $75 billion per day. The New York Federal Reserve will continue overnight repurchase operations through mid-October (Repo operations) and it will involve three 14-day operations involving $30 billion as well as continued overnight operations of at least $75 billion each. There is an expectation that the Fed will expand its balance sheet to address the situation. According to Bloomberg, Mike Pompeo said the U.S. is working on a diplomatic resolution with Iran, but that Trump is prepared to take other action if necessary. President Trump said he has no intention of meeting President Rouhani at the UN this week. At the same time, Iran's foreign minister refused to rule out war after more American troops were sent to Saudi Arabia.
Key MoversThe British Pound has fallen 0.40 percent against the Greenback this morning. According to the BBC, Jeremy Corbyn faces a battle over the Labour party's Brexit policy today as members choose between two competing strategies at the party's annual conference. They will decide whether Labour should explicitly back Remain in any future referendum, or adopt Mr. Corbyn's stance of staying neutral until a later date. In Germany, factory activity shrank at the fastest pace in a decade, with the country's manufacturing PMI plunging to 41.4. The EUR/USD pair is falling to 1.0992 this morning, which is a key short-term technical support.The Loonie has increased around 0.25 percent this morning (the USD/CAD pair trades at 1.3266), following the robust wholesale sales data released. According to Statistics Canada, wholesale sales rose for a second consecutive month in July, up 1.7 percent to $ 65.4 billion, which was above the expectation for 0 percent. Four of the seven subsectors, representing 64 percent of wholesale sales, reported increases; the personal and household goods subsector and the motor vehicle and motor vehicle parts and accessories sub sector contributed the most. The Loonie is performing very well despite the strength of the U.S. dollar this morning.
- USD/CAD: 1.3251 - 1.3300 ▲
- EUR/USD: 1.0960 - 1.1028 ▼
- GBP/USD: 1.2393 - 1.2484 ▼
- AUD/USD: 0.6750 - 0.6797 ▲
- NZD/USD: 0.6250 - 0.6322 ▲