U.S. Dollar erases some depreciation ahead of September
The U.S. Dollar is trading in tight ranges as August comes to an end, with renewed hostilities in the Middle East keeping markets on edge.
Per reports over the weekend, the U.S. and Iran resumed exchanging strikes after about a month of ceasefire. Naturally, concerns over oil prices are making a comeback as Brent crude oil has resurged to over $91.00/barrel. Once more, inflationary worries may affect the trajectory of interest rates for monetary policymakers. Meanwhile, investors wonder how long the good times across equity exchanges can be sustained amid bad news on the armed-conflict front.
On Friday, Federal Reserve Chairman Kevin Warsh sent a message of clarity about the Fed’s thinking, explaining that the current financial environment is not restrictive and that voting members were ready to use interest rates as the “predominant tool” to rein in inflation as needed. While not guaranteeing a hike at the next meeting on September 16th, the chances improved from just a flip of the coin to 63.0% odds that a 25-basis-point increase could occur. We shall see if the Buck is able to minimize its monthly losses. As of now, August represents a loss of 0.75% for USD overall, according to the Bloomberg Dollar Spot Index. From July 23rd to August 21st, it experienced a 2.6% decline but has recovered some ground since.
What to Watch This Week…
- Euro-zone CPI, Tuesday
- US Nonfarm Payrolls, Friday 8:30AM
- USA Online is always open
The complete Economic Calendar can be found here.
EUR
The Euro looked likely to have a strong showing for August, but the Buck’s recent resurgence has cut its advance to just half of one percent as August comes to an end. This week will be crucial for understanding how much inflation has sped up after a slowdown period, with expectations for the Consumer Price Index due tomorrow at 0.5% for this month. Additionally, we will get the unemployment rate on Tuesday, while Thursday brings Purchasing Managers’ Index figures, all forecast to show expansion. Friday will feature July retail sales numbers. While not the biggest factor affecting the currency, a “No” vote in Iceland on a referendum to join the European Union surprised Brussels, with polls showing the Icelandic population concerned about fisheries and the environment as the main reasons for hesitation to integrate. The rejection is a message that EU membership needs to provide more incentives.