Monex: Hoofdeconoom ECB praat euro (tijdelijk) omlaag - dollar herstelt

Monex: Hoofdeconoom ECB praat euro (tijdelijk) omlaag - dollar herstelt

Currency
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Hieronder volgt een kort commentaar in het Engels van Ranko Berich, Head of Research bij Monex Europe op de Amerikaanse dollar, euro en het Britse pond.

EUR

The euro fell back from two-year highs overnight after European Central Bank Executive Board member Philip Lane commented on the exchange rate. Lane said “the euro-dollar rate does matter”, and acknowledged the “repricing” - or rally - in the exchange rate over recent weeks. The euro’s sell-off in response may well prove transient. A weakening euro was often a byproduct of ECB policy during the Mario Draghi era when interest rates fell significantly and asset purchases drove down real and nominal yields in the eurozone. However, with yields already at rock bottom, it is unclear how much more euro weakness the central bank will be able to drive with further policy easing. As Lane pointed out, “the euro-dollar rate is also endogenous to monetary policy” - meaning that it is influenced by rate changes, but is also capable of prompting tweaks in policy by changing the outlook for growth and inflation. On the data front, eurozone unemployment printed yesterday at 7.9% for July, while headline annual inflation fell to 0.4%. German Retail Sales were released earlier this morning and showed a continued 0.9% contraction in July.

USD

The dollar finally managed to stem its losses overnight, having reached fresh lows against most major currencies over the past couple of trading sessions. NOK, EUR, and AUD are leading the losses among the G10 group of currencies, with idiosyncratic factors driving the latter two currencies. Treasury Secretary Steve Mnuchin called for renewed efforts to deliver another round of fiscal stimulus, telling a Congressional subcommittee “what is most important is that we deliver some relief quickly to the American workers impacted by this.”. Mnuchin also reportedly spoke to House leader Nancy Pelosi. Negotiations between Republican and Democrat lawmakers over a new round of stimulus broke down almost a month ago. Final manufacturing purchasing managers indices were released by both Markit and ISM, both of which remained in solidly expansionary territory. Federal Reserve Governor and frequent thought leader Lael Brainard gave a speech in which she said that changes in the economy meant the Fed’s major framework change, announced last week in a speech by Jerome Powell, were necessary. Echoing recent comments from Powell, Brainard pointed out that allowing the unemployment rate to fall below 5% during the last expansion had bought considerable benefits to Black people. ADP will release an estimate of monthly non-farm payrolls growth today at 14:15 CET.

GBP

Sterling rose to a 2020 high against the dollar in yesterday’s session as the greenback was trading lower against the G10 in the morning session, however, not too dissimilar to EUR and CAD, the pound gave up its record high as the dollar bounced back in the afternoon. Ultimately, GBPUSD sat only 0.11% higher on the day. Boris Johnson’s Conservative party members criticised the idea of increasing taxes to recoup some of the damage inflicted to the budget due to coronavirus yesterday after reports over the weekend hinted at the policy being included in the Treasury’s autumn budget. This morning, the pound is being weighed down by repeated headlines about the feasibility of a hard Brexit along with a resurging dollar after comments from the ECB’s Lane weigh on EURUSD. In addition, today’s sole data point for the UK has been and gone, with the Nationwide house price index rising above expectations in August to post 3.7%. This will be the largest gain in house prices since 2004 as a temporary break in stamp duty and pent up demand due to lockdown filters through into the market. However, most economists agree that the housing market will begin to cool as government support measures, namely the furlough scheme, are wound down. The tax break is set to continue until March 2021.