Dollar and equities lower following mixed US economic data

Dollar and equities lower following mixed US economic data

Closely watched US retail sales data was released this morning and results were mixed. Traders remain focused on the stalemate in Congress over the coronavirus relief plan leading to a lower dollar. The UK pound outperformed overnight as the UK added more EU countries to quarantine restrictions. The euro is up slightly, despite European equities generally lower on fresh Covid-19-related concerns. There was a historic Israeli-United Arab Emirates (UAE) peace deal announced yesterday, as the UAE becomes the third Arab country after Jordan and Egypt to sign a deal to normalize relations with Israel. Volatility across all markets is declining.
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    August 14, 2020

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  • USD

    The dollar fluctuated overnight, and is currently lower. Retail sales were mixed: July’s 1.2% was worse than expectations of 2.1%, but June’s 7.5% was revised higher to 8.4%. Two less influential economic releases were Nonfarm Productivity and Unit Labor Costs for Q2, and both came in much better than expected. Traders continue to focus on the stimulus package stuck in Congress, and are less interested in Trump’s opposition to Postal Service funding after he said he would sign a bill if included.


    The UK pound is the top performing currency overnight after the UK government added France and the Netherlands to its list of countries from which people arriving have to quarantine for 14 days. The Foreign Office is advising its own people against “all but essential travel” to a growing list of tourist destinations.


    The euro continues within its well-established uptrend, despite weaker equity markets today. Traders seem focused on the dollar’s falling real yield advantage following steady US yields and higher US inflation. The Eurozone’s Trade Surplus expanded in June, and was significantly better than expected, but Employment data was weak. GDP Q2 contracted by 12.1% QoQ, but it was fully expected, so there was little reaction.


    The USD/CAD currency pair, which traded briefly below 1.32 yesterday, has moved higher today. Good news in the form of better-than-expected Manufacturing Sales MoM data was offset by trade concerns related to US-China trade negotiations this weekend. Oil prices are steady near $42.00.


    The Chinese yuan moved little overnight, fluctuating around 6.95.

    After testing 107, the USD/JPY currency pair has dropped 0.35% to 106.50, as traders square up ahead of the US-China negotiations this weekend.

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Scott Petruska, CFA
Scott Petruska, CFA

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