The Greenback is Steady as the Euro Plunges on Bleak Economic Outlook

Xe Corporate

23 september 2019 — 3 min read

**Overview:**

  • The American dollar is up by two-tenths of a percent on a basket of G-10 currencies.

  • Once again, as the revised Brexit date grows nearer, and there is no orderly separation deal in place, there is pressure on the GBP.

  • Negative economic data out of Germany and falling demand for goods and services is pushing the euro downwards.

**Highlight:**

PMIs across economies are pointing to bleak outlook, pushing stock market indices lower as investors fear that world economies could be heading for a recession. Gold remains elevated around $1,520 an ounce and WTI crude oil prices are falling, closing the recent gap after reports emerged that Saudi Arabia will restore lost oil output following recent attacks. The market remains cautious and today, we expect a series of Fed speakers to reveal their thinking behind the last FOMC decision.


US DOLLAR

The greenback makes a strong start this Monday, trading 0.2% higher against a basket of G-10 currencies. The DXY index rallied to a two-week high despite lack of clarity on ongoing US-China trade discussions.


BRITISH POUND

The cable is trading with a negative sentiment over growing doubts that a new Withdrawal Agreement can be concluded before the exit date of October 31st. With less than 40 days to go, the UK and the EU remain (very) far apart.

In the absence of hard economic data, technical factor re-adjustments were into play this morning. GBP/USD came under selling pressure earlier, as traders prefer to take the profit off the table before the next directional move. The pair has appreciated nearly 5% so far this month and we expect heightened volatility over the coming weeks


EURO

EUR/USD is trading 0.35% lower this morning, a touch below the 1.10 mark, weighed down dismal PMI report. At 49.1, the German Composite PMI sank to lowest since October 2012. The manufacturing sector continues to slide into deeper contraction and businesses are holding off hiring activities due to growing pessimism.

Once again, the German economy is finding it hard to break the shackles of global anti-trade measures, Brexit and a bleak outlook for the auto industry. It comes as no surprise to see growth in the Eurozone stalling. Demand for goods and services fell at the fastest rate in over six years. The IHS Markit Eurozone Composite PMI is now sitting at 50.4 in September, down from 51.9 in the previous month.


CANADIAN DOLLAR

USD/CAD stays a touch within 1.33 mark in a directionless trading session. The pair climbed to the upper ranges of recent trading range after Canadian retail sales missed market estimates last Friday. Lack of key economic driver on the slate today is likely to keep the pair within familiar ranges.


AUSTRALIAN DOLLAR

The Aussie dollar continues on a slow downward trend as optimism while its New Zealand counterpart is up slightly on the day. about a productive end to the US-China trade talks. AUD now sits at 0.67697 and NZD USD is at 0.62798.

JAPANESE YEN

Dollar-yen slips towards the mid-point of 107. Falling Treasury yields and mixed reports around ongoing US-China trade talks are weighing down the greenback. We expect the pair to stay within familiar ranges in the absence of major data releases. Japan releases its manufacturing PMI, but it is unlikely to surprise to any upside and break the current global trends.

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