The dollar continues to fall against the euro and the ruble
The markets continue a methodical, albeit modest, sale of the dollar. The US currency lost 0.5% on the USDX index from the beginning of the week, but it was a decline from day to day. The news background is clearly conducive to the development of pressure on the dollar, but market participants are constrained by the fact that since the beginning of the year its weakening looks very significant.
Among the news against the USD, there are calls for caution with rises from representatives of the Fed due to sluggish inflation. Yesterday’s publication of non-production ISM and Markit PMI indexes did not meet expectations, noting a possible slowdown in the growth of services in August. In addition, ahead of schedule decided to leave his post on the Federal Reserve Board Stanley Fischer. Being a centrist, he recently advocated raising rates, so that now in the markets doubts are growing in another increase by the end of the year. And later in the Beige Book, the Fed pointed out concern for the automotive industry in the US. Before that, there was a boom, and now there is a noticeable “correction” in the volume of production.
The growth rate of the American economy is no longer favorable from the global ones. The states were at the forefront of recovery, but now other economies are growing at a faster pace. For example, the GDP growth rate in Canada exceeds 4% by the previous year, forcing the Central Bank to raise the rate at the second meeting in a row. This was a surprise for the markets, which waited for such a step only at the end of October. Moreover, the Bank of Canada did not rule out further increases this year. This decisive reversal of the policy helped yesterday the Canadian luny to update the lows in more than two years and increase the gain in the last rally from May to 12%.
Such a decisive attitude and a departure from the incentives may be peculiar to the ECB. Today, as part of a regular press conference and the announcement of new forecasts on inflation and growth, traders are waiting for Draghi to condemn the excessive sharp strengthening of the single currency. However, earlier in Jackson-Hole the head of the ECB ignored this question, which caused a surge in purchases of the euro. References to a lasting economic recovery and the temporary nature of low inflation are able to support the existing growth of the single currency, although this is unlikely to please the regulator.
On the Russian market yesterday, the ruble strengthened after the oil on reports of the strength of Hurricane Irma. USDRUB lost another 17 kopecks to 57.35, at the risk of approaching close to 57 today. EURUB decreased on Wednesday by 15 cents to 68.42. Today’s prospects for the pair are very much dependent on the reaction to Draghi’s performance. Here the important levels are 68 and 69. Overcoming these marks can be an important signal for the development of the trend in the corresponding direction.