Daily Market Update

Dollar Gains to Start Second Half of the Year

July 01, 2022

The U.S. dollar is stronger against most of its major counterparts this morning, with notable gains versus commodity-backed currencies. 

Overview

After an astonishingly bad first half of the year, U.S. stock futures point to a lower open again today.  The S&P suffered its biggest first-half drop since the 1970s, helping spur the safe-haven greenback’s rally.Later this morning, construction spending and ISM manufacturing prints will cross the wire. There are no Fed speakers on today’s docket.    We expect liquidity to become thin in the afternoon hours as Europe goes home for the weekend, Canada is closed for Canada Day and some traders take off early to celebrate Independence Day.  All U.S. financial markets will be closed Monday, July 4th.

 

What to Watch Today…

  • ISM Manufacturing and Construction spending 

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EUR

The Euro is half a percent weaker against the U.S. dollar.  While the fall is significant it is still less than the 1+% decline in other major currencies against the greenback.  A report this morning showed that preliminary consumer prices for June rose 8.6% year over year, higher than the 8.4% expected.  The report has increased calls for the European Central Bank to become more aggressive in fighting inflation.

While ECB President Lagarde was a touch hawkish this week, the projected interest rate hikes for the ECB lag behind that of the U.S. Federal Reserve.  The growing interest rate differential is the main reason driving the Euro close to the lowest level since 2002.

 

AUD

The Australian and New Zealand dollars both fell over a percent against the U.S. dollar overnight.  The Aussie is now at its weakest level versus the greenback since June of 2020.  The Kiwi is at its worst level since May 2020. Investors are now pricing in a bigger chance of a global recession, which has hit the growth currencies.  In addition, the price of many metals is also in decline this morning adding to the antipodean pair’s woes.

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