Weak economic data and negative views from asset managers continue hitting the Greenback
Friday 21 June, 2019
Daily Currency UpdateUSD - United States DollarThe US dollar index fell slightly by around 0.05 after Jeffrey Gundlach, Chief Executive Officer at DoubleLine Capital, mentioned that the US dollar is likely entering a “bear market”. He said that the gauge’s decline to its 200-day average price signals a “moment of truth.” At the same time, Paresh Upadhyaya from Amundi Pioneer Asset Management said the US dollar is poised to slide as much as 10 percent into a “modest bear market” as treasury yields collapse on the back of the Federal Reserve’s dovish pivot. In other news, Fed Vice Chairman Richard Clarida said that the argument in favor of cutting interest rates has strengthened recently amid heightened uncertainty. In an interview with Bloomberg Television, he added: “…the case for providing accommodation has increased... especially in the last six or eight weeks, there has been elevated uncertainty about the outlook.” Clarida’s comments today back the speech from Chairman Jerome Powell last Wednesday, where Fed officials left interest rates on hold. After Clarida and Powell comment this week, an interest-rate cut as early as the Fed’s next gathering seems inevitable. Clarida also brushed aside concerns that the Fed’s political autonomy is at risk from President Trump’s determined criticism of the Fed. He said, “I don’t think our independence is under threat.” On the economic release side, the bad news for the US dollar continued. According to IHS Markit, the flash manufacturing purchasing managers index dropped to 50.1 in June from 50.5 in May. This is the worst reading since September 2009, indicating only a fractional rise in production volumes in June, with the pace of expansion the slowest since the current phase of recovery began in mid-2016. Service providers also experienced the weakest business activity performance for around three years.
Key MoversThe Euro continues to rise after data showed that the Eurozone's flash PMI composite hit a seven-month high of 52.1 in June. Growth was primarily driven by the service sector, which offset the ongoing downturn in the bloc's manufacturing sector. Eurozone PMI data showed no further deterioration in sentiments in the Eurozone. Underlying growth momentum remained weak, but there were more tentative signs of improvement in Germany and France. In the U.K., Boris Johnson and Jeremy Hunt are the chosen ones; they will "compete" in the contest to become the U.K.'s next Prime Minister as they seek votes from the Conservative Party's members over the next month. However, Boris Johnson will face Jeremy Hunt amid rumors that some of the Boris camp voted for Hunt because it is an easier opponent to beat in the last round. Probably Hunt's chances are minimal. The British Pound is falling against all the major currencies this morning except for the Kiwi dollar. The U.S. nearly bombing Iran hit market sentiment; global equity indexes are falling this morning.
- USD/CAD: 1.3169 - 1.3243 ▲
- EUR/USD: 1.1281 - 1.1344 ▲
- GBP/USD: 1.2630 - 1.2700 ▼
- AUD/USD: 0.6909 - 0.6940 ▲
- NZD/USD: 0.6560 - 0.6602 ▲