USD - United States Dollar
Equity markets were down for the second trading day in a row, and the US dollar has made positive gains. As we’ve seen for the last six months, when stocks are sold off the US dollar is snapped up.
The US Dollar Currency Index was up a quarter percent since it closed. The dollar was up nearly 1 percent against the Great British pound and over half a percent against the Canadian dollar.
The Labor Day bank holiday ensured that volumes remained thin after last week’s equity losses. Both the S&P 500 and Nasdaq closed the week lower and this prompted a broader risk off tone.
The US dollar, having bounced off 28-month lows, appeared to have found some support. Markets paused to take stock of recent moves ahead of further anticipated weakness leading into the end of the year. With little of note on today’s macroeconomic docket attentions turn to Thursday European Central Bank policy meeting and Fridays Core CPI inflation print as key markers for direction into the weekly close.
The Great British pound was the day’s big mover. It went lower because of growing concerns a Brexit trade won’t be reached. Reports emerged overnight that Britain plans to enact new legislation to override key components of the Withdrawal Agreement. The move could undermine negotiations to date and derail hopes for a clean break. Prime Minister Boris Johnson suggested that if a deal could not be reached by mid-October then it is unlikely a trade deal will be agreed. He implored all sides to move on and work on contingency plans. Sterling lost almost 1% through the day, tumbling below 1.3250 and 1.32 to touch intraday lows at 1.3140. With uncertainty around Brexit growing and the likelihood of a no deal divorce increasing we expect increased volatility moving into the latter half of Q3 and into Q4.
The Australian dollar offered little to excite investors through trade on Monday. It maintained a 30-point range and bounced between 0.7270 and 0.7300. Having given up highs above 0.74, the AUD struggled as Labor Day ensured volumes remained thin and markets on edge. Investors continued to ignore broader fundamentals instead chasing positive sentiment as a catalyst to drive direction. Despite the correction last week, the Australian dollar continued to mark higher lows and higher highs, suggesting there is still room to the upside. With little of note on the docket this week we expect the AUD will remain contained within recent ranges with a break in sentiment the agent driving a break in either direction.
1.177 - 1.182 ▲GBP/USD:
1.301 - 1.317 ▲AUD/USD:
0.722 - 0.730 ▲USD/CAD:
1.308 - 1.319 ▲