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The dollar carried on with its slide from the previous trading sessions as investors began to take Trump’s government shutdown threats seriously. Although the Donald stuck to the script in his speech to the American Legion, signs of a rift in the administration kept markets on edge.

  • U.S. flash manufacturing PMI down from 53.3 to 52.5 vs. 53.4 consensus
  • U.S. flash services PMI up from 54.7 to 56.9 vs. 55.0 estimate
  • U.S. new home sales slipped from 630K to 571K in July
  • Euro zone consumer confidence held steady at -2 as expected
  • U.S. EIA crude oil inventories down by 3.3 million barrels as expected

Major Events/Reports

Mixed U.S. data

Uncle Sam’s economic reports turned out mixed as a bag of nuts as a couple of figures fell short of estimates while one surprised to the upside.

First, the good news. The flash services PMI advanced to 56.9 to reflect a much stronger pace of industry growth in August versus the estimated 55.0 figure. To top it off, the July reading was upgraded from 54.2 to 54.7.

On the other hand, the flash manufacturing PMI tumbled from 53.3 to 52.5 to indicate a slower pace of industry expansion versus the projected rise to 53.4. Underlying data revealed that the dip was due to weaker gains in output and new orders.

Lastly, new home sales also turned out to be a disappointment as the reading came in at 571K for July, much lower than the projected fall to 611K, although it’s worth noting that the June reading was upgraded to 630K. According to the U.S. Census Bureau, the 9.4% drop in new home sales was mostly due to the spike in prices, making houses too expensive for potential buyers.

U.S. equities tank on shutdown threat

Earlier in the day, U.S. President Trump spoke of shutting the government down if that’s what it takes to get funds to build his infamous wall. This sparked a fresh batch of worries for Wall Street, leading stock indices to close in the red:

  • The Dow 30 index is down 87.80 points to 21,812.09 (-0.40%)
  • The S&P 500 index is down 8.47 points to 2,444.04 (-0.35%)
  • The Nasdaq is down 19.07 points to 6,278.41 (-0.30%)

To make things worse, internal conflict among lawmakers has also cast more doubts on the administration’s ability to push its fiscal reform agenda forward.

Still, Senate majority leader McConnell assured that lawmakers share the same goal with the President and that “anyone who suggests otherwise is clearly not part of the conversation.” Trump also tried to inject more confidence in the markets by sticking to the script in his speech, declaring “It is time to heal the wounds that divide us. We are one people, with one home, and one great flag.”

Major Market Mover(s):

NZD

The Kiwi was weakest against its peers for the day as growth downgrades in the Treasury’s pre-election update weighed on RBNZ tightening hopes.

NZD/JPY is down 102 pips to 78.73 (-1.28%), NZD/CAD dropped from .9143 to .9063 (-0.84%), NZD/CHF fell to .6971 (-1.02%), and NZD/USD is down to .7224 (-0.74%).

USD

The dollar also chalked up losses against most of its peers on speculations that the Trump administration will push through with the government shutdown.

USD/JPY is down 55 pips to 109.01 (-0.50%), USD/CHF dropped from .9676 to .9654 (-0.22%), EUR/USD is up 49 pips to 1.1810 (+0.42%), and USD/CAD is down 13 pips to 1.2547 (-0.12%).

EUR

The euro recouped some of its losses from the earlier trading session as traders kept their hopes up for tapering remarks in Draghi’s Jackson Hole speech.

EUR/GBP is up 54 pips to .9225 (+0.59%), EUR/AUD popped up to 1.4942 (+0.52%), EUR/CAD advanced from 1.4775 to 1.4819 (+0.30%), and EUR/CHF rose to 1.1400 (+0.13%).

Watch Out For:

  • 11:45 pm GMT: New Zealand trade balance (200M NZD deficit expected, 242M NZD deficit previous)