Daily Currency Update

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The Greenback continues rising amid weaker numbers in German employment

USD - United States Dollar

The U.S. dollar index increases 0.16 percent along with real gross domestic product numbers. These grew at an annual rate of 2 percent in the second quarter of 2019. In the first quarter, real GDP increased by 3.1 percent. According to the BEA, the GDP estimate released this morning is based on more complete source data than was available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.1 percent. The revision primarily reflected downward changes to state and local government spending, exports, private inventory investment, and residential investments. These were partly offset by an upward revision to personal consumption expenditures.

Regarding the U.S.-China trade war, it seems like the trade talks have kept the FX market on edge this week and it looks like it is going to stay this way for a while. According to Bloomberg, the White House says that it does not to expect a deal anytime soon, and China says it could retaliate on the planned tariff hike by U.S. President Donald Trump – though it prefers not to. Chinese Commerce Ministry spokesman Gao Feng said, "China has ample means for retaliation, but thinks the question that should be discussed now is about removing the new tariffs to prevent escalation.”

Furthermore, two Fed officials helped the case for a September rate cut. San Francisco Chief Mary Daly said, "It's better to avoid the ditch than dig yourself out of the ditch." On the other side, Dallas Regional Head Robert Kaplan said the Fed needs to be "forward-looking" and may need to adjust the monetary policy. Despite the lack of impressive GDP numbers and the dovish comments, the U.S. dollar continues behaving strongly.

Key Movers

The Euro weakened in overnight trading against the U.S. dollar, and it continues in a free fall following the German preliminary CPI month to month release. The inflation rate in Germany, as measured by the consumer price index, is expected to be 1.4 percent in August 2019. According to Destatis Germany, consumer prices are expected to decline by 0.2 percent in July 2019. At the same time, the other important pairs such as EUR/AUD, EUR/CAD and EUR/NZD are falling 0.26, 0.21 and 0.11 percent respectively, after the release of German unemployment claims rate in August, which came in at 5 percent. The increase of this number represents the fourth straight month that joblessness has failed to drop. The unemployment change number came in at 4k, which was higher than the previous number in July (1k) and the expectation of 3.5k. This bounce in unemployment provides a reminder that labor market conditions are beginning to soften amid the weight of fears of a recession in the German economy as well as in the Eurozone.

Expected Ranges

USD/CAD: 1.3265 - 1.3315 ▼

EUR/USD: 1.1028 - 1.1110 ▼

GBP/USD: 1.2177 - 1.2235 ▼

AUD/USD: 0.6714 - 0.6755 ▼

NZD/USD: 0.6304 – 0.6373 ▼