Greenback bulls weren’t able to sustain their strength into the weekend as global risk sentiment shifted big time towards positive, thanks to optimistic geopolitical developments and the Fed taking action to support lending markets.
United States Headlines and Economic data
Monday:
- Low inflation? Nothing to worry about, Fed’s George says
- Jerome Powell pushes back on Trump pressure, stressing Fed’s freedom
- U.S. consumer credit growth weakens a bit in August
- Trump signs trade deal with Japan as tensions escalate with China and the EU
- Boston Fed’s Rosengren: US economy ‘consistent with staying where we are’
- A positive start for the Greenback, likely on elevated global risk aversion sentiment after reports of China seeking to narrow its trade deal with the U.S. likely had traders a bit more anxious for the upcoming meetings between China and the U.S. in Washington, D.C. this week.
Tuesday:
- U.S. Small business optimism declines but remains historically high
- US producer prices post the biggest decline in eight months in September
- Fed’s Evans: I wouldn’t mind another interest rate cut
- Powell says the Fed will start expanding its balance sheet ‘soon’ in response to funding issues
- U.S. Economic Outlook Stays Near 3-Year Low: IBD/TIPP
- Fed’s Kashkari says more easing needed, not sure how much
- Global risk aversion sentiment was on the rise once again and likely the support for the somewhat broad move higher for the Greenback during the London / U.S. overlap, this time sparked by reports of the U.S. blacklisting more Chinese companies from trade, and possibly on reports of the White House looking to limit Chinese stocks within government pension funds, creating further anxiety with the upcoming big U.S.-China trade meeting.
Wednesday:
- U.S. August wholesale inventories revised down; sales flat
- U.S. Job openings (7.1 million) & separations little changed in August; hires edge down
- Federal Reserve policymakers increasingly divided on way ahead, minutes show
- USD moves higher during the U.S. trading session, arguably after signs of a partial trade deal between the U.S. and China appear, a condition China set if President Trump refrains from further tariffs.
Thursday:
- US consumer prices were unchanged in September, the weakest reading since January
- Minneapolis Fed’s Kashkari says rates are ‘close to neutral’ but ‘slightly contractionary’
- Fed’s Kaplan says he’s open-minded about further interest rate cuts
- Global risk sentiment shifted positive pretty quickly on the session, sparking a move out of ‘safe havens’ against the riskier currencies. The risk moves were fast and furious, starting with a short spike in risk-off behavior on reports of no progress between the U.S. and China on trade talks. This sentiment was quickly reversed later after reports on the U.S.-China trade negotiation front (White House denies report China’s Liu He plans to leave Washington early; U.S. Weighs Currency Pact With China as Part of Partial Deal) and news of a potential pathway to a Brexit deal after a constructive meeting between Britian and Ireland meeting.
Friday:
- Fed’s Mester: U.S. likely to avoid serious downturn; content to keep rates steady
- U.S. import prices rise modestly, non-oil prices drop
- Fed’s Kaplan says not sure economy can avert severe slowdown
- Trump announces US-China ‘phase 1’ trade deal, tariff truce – nothing comprehensive released as expected, with the jist of the deal being that China will buy soybeans from the U.S., and in exchange, the U.S. will not move forward with another round of tariffs on $250B in Chinese goods.
- Rising global risk-on sentiment and the Fed’s announcement that it is extending its overnight funding operations through January 2020 was likely the reasons for the Greenback’s under performance against the risk currencies (i.e., comdolls and Sterling) while staying positive against the safe havens (Japanese yen and Swiss franc) into the weekend.
