Dollar surges as safe-haven asset, bond yields rising

Much of the Buck’s renewed strength is tied to its return to a safe-haven role as investors and traders weigh the effects of a six-month war between the U.S. and Iran that has escalated in aggression. Saudi Arabia reported its ships being attacked in the Strait of Hormuz, only making matters worse for the flow of energy resources as Brent Crude Oil prices rose above $95.0/barrel. Meanwhile, the fear of long-term inflation is adding to bets that central banks will need to hike interest rates sooner rather than later and elevating yields across the Treasury bond market.

Equities also seem to be feeling the pain after S&P 500 futures headed downward, now facing three consecutive sessions of losses. Analysts are pointing out that the resilience experienced across stock exchange indices in recent months could break if U.S. Treasury and Japanese bond yields break through their resistance levels. Overall, the news is quite sour, and the Buck is benefiting from the reconsideration and hesitation in risk appetite. Later this morning, we will get the release of August’s ADP Employment Change at 8:15 AM, followed by July’s Durable Goods Orders and Factory Orders at 10 AM. At the time of writing, the odds of a Fed hike for the September 16th gathering stood at 66.7% after briefly touching 70.0%.

What to Watch This Week…

• US Nonfarm Payrolls, Friday 8:30AM
• USA Online is always open

The complete Economic Calendar can be found here.

EUR

The Euro fell to its lowest value since mid-August as the Buck experienced a bit of recovery while economic indicators highlighted growing price pressures. Consumer Price Index figures from August, released yesterday, showed the month experienced double the expected pace of advancement at 0.4% vs. a 0.2% forecast. Subsequently, the annual average rose from 2.9% to 3.3%, marking the highest inflation in about three years for the Eurozone. Tomorrow, we will get data in the form of the Purchasing Managers’ Index as well as the Producer Price Index. Friday will feature July’s Retail Sales, expected to show expansion after contracting the month prior. The Euro is facing some volatility after jumping slightly in August.

NZD

The New Zealand Dollar dropped to its weakest level against the U.S. Dollar since the end of July despite a 25-basis-point increase by its central bank. Indeed, the Reserve Bank of New Zealand raised its interest rate to 2.75%, making it two straight hikes in a row, but offered no guarantee of continuing on this path. Officials lowered their rate expectations, which in turn brought down 2-year bond yields as well as yields for 10-year notes. Inflation gauges have been mixed, with producers seeing a major increase in Q2 of 2.9%, while July witnessed deflation according to the ANZ Commodity Price Index.