Daily Currency Update

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The Greenback returns some gains after contradictions from White House and more gloomy declarations from government officials

USD - United States Dollar

The U.S. dollar had a significant pullback in the trading session yesterday, following an anemic equity market after Secretary of State Mike Pompeo said Huawei was not the only Chinese company that poses risks to the U.S. At the same time, President Donald Trump said he is not ready to make a deal with China.

Furthermore, President Trump said that he is open to many alternatives to avoid a recession, and he is considering cuts in capital gains taxes as well as payroll taxes as he weighed new stimulus measures, while also suggesting those actions are not needed, as there is no recession coming. He added, "…we're in such a strong economic position." However, it makes us wonder why the White House spokesman Hogan Gidley denied reports the Trump administration was considering a temporary payroll tax cut. Another highlight from Trump was his repetitive rail against the Fed. He noted that "…if the Fed would do its job, we'd have a tremendous spurt of growth."

In general, the U.S. dollar index is trading flat this morning, but it is losing against commodity currencies such as the Loonie, Aussie dollar, and Norway Krone. However, it is performing better than the British Pound, Japanese Yen, and Swiss Franc.

A likely FX driver is going to be the minutes from the Fed’s last meeting, which will be released later today at 2:00 pm EST. However, they might be a little stale because market participants are looking for fresh monetary clues, such as Friday's speech by Jerome Powell at the Jackson Hole symposium. According to Bloomberg, market participants are pricing in between 50 and 75 basis points of cuts by the end of the year, so there is space for disappointment because the last few speeches from Fed officials, such as Rosengren speech (see yesterday’s daily commentary for details), don't sound as dovish as the market wants.

Key Movers

The Euro initially rallied in yesterday’s trading session, when Giuseppe Conte said "arrivederci" as Italy's Prime Minister after being in power for just over a year. He blamed Matteo Salvini for the government's fall, accusing him of "irresponsible rebellion." Italian bonds and the Euro rallied, while its stock market fell.

The British Pound started the trading session yesterday as an under-performer after Prime Minister Boris Johnson sent a letter to European Council President Donald Tusk, which was an ultimatum on the Irish backstop, but the Sterling recouped those losses and then some on a headline from German Chancellor Angela Merkel, where she said, "…we will think about practical Brexit solutions."

The EUR/USD and GBP/USD pairs are falling 0.03 and 0.26 percent respectively this morning, and the EUR/CAD and GBP/CAD pairs are plunging 0.42 and 0.70 percent respectively.

Expected Ranges

USD/CAD: 1.3250 - 1.3332 ▼

EUR/USD: 1.1028 - 1.1112 ▼

GBP/USD: 1.2085 - 1.2153 ▼

AUD/USD: 0.6782 - 0.6822 ▲

NZD/USD: 0.6395 - 0.6430 ▼