Buck gets a break, equities worldwide dwindle
The U.S. dollar is trading in mostly tight yet favorable ranges as risk appetite has faded, with global equities in decline while long-dated Treasury bond yields reached multi-decade highs.
Indeed, the markets seem a bit sour as investors worry about the weight of rising borrowing costs and are demanding a higher premium to finance government deficits while protecting themselves from stubborn inflationary pressures. The S&P 500 Index had a third consecutive session of losses, while yields on 30-year bonds climbed to their highest point since 2007. For now, it is affecting all other FX against the Buck, but only slightly, as the Buck has recently been trying to contain a drop in value since the end of July, currently at 1.8%.
Regarding the Middle East, it was unwelcome news to markets that the White House would not renew a stalled truce between the U.S. and Iran, thus negating hopes for an olive branch to work on a deal to end the conflict. The strategy of economic pressure and the blockade remains, which is causing spontaneous attacks on ships. Analysts fear there is no easy way out, but markets remain with fingers crossed that a surprise development can turn the tide. Today’s data releases will include a look back at July housing and building gauges, as well as industrial production. Tomorrow, we will get the Fed’s minutes from their last meeting, which could be interesting with the Warsh initiative to be less communicative. Traders and economists will look for details in the official insights.
What to Watch This Week…
- Industrial Production, Tuesday, 9:15AM
- S&P Global PMIs, Friday, 9:15AM
- USA Online is always open
The complete Economic Calendar can be found here.
GBP
Pound Sterling hit the brakes on its rise, but it remains near its strongest level against the Buck since mid-May. Earlier releases showed that economic indicators are a bit mixed, as labor numbers from June and July came in with some surprises. It was good news that wages went up, with average weekly earnings for the three months through June climbing 4.1% vs. 4.0%. Meanwhile, the unemployment rate rose to 4.9% vs. 4.8% estimated.
In terms of hiring, there was an unexpected contraction of (-13k) Payrolled Employees, while economists had forecast it would be flat. Simultaneously, jobless claims fell dramatically, by (-11k), after climbing the month prior by 6.7k. A new administration is hoping to boost the economy amid global turmoil, but the numbers overall suggest the Bank of England must concern itself with how struggles in labor could impact demand. CPI numbers will be out for the Eurozone and U.K. tomorrow.