NEWS / Central Banks

Dollar recovering marginally after Labor day holiday

September 5th - Currency markets are sitting in a rather mixed mood now with traders mindful that the US spent yesterday observing a public holiday. The dollar has been under pressure recently after a spate of downbeat economic forecasts left many with little doubt that better cash returns are going to emerge from elsewhere but we??™ve already seen some opportunistic profit taking drive the USD higher and such short term rallies may reoccur in the near term until we see the next round of fundamental data. Arguably there??™s little of note going to be released today so the posturing will continue but tomorrow??™s beige book should offer further insight as to just how quickly the US economy is slowing, whilst non-farm productivity and unit labor costs should also provide some additional direction with regard to the presence of inflationary pressures (or lack thereof). The next FOMC meeting is now just over two weeks away so each item of data is going to be scrutinised but the Bank of England also meets this week to debate its current monetary policy. There has already been one surprise hike in recent months and although softer energy prices may start to lift some of the pressures, the bank??™s objectives remain clear. Cable is holding above the psychological 1.90 mark and although more profit taking could lead to a dip lower, there??™s a good chance that any move like this would prove to be very short lived.


Tim Wilbraham