The U.S. Dollar is trading in mixed ranges, with the most impact on the three majors Euro, Pound, and Yen, which have regained some of their value.
Overview
Following the devastating reaction across equity markets yesterday, based on inflationary as well as recessionary fears after further price growth in August, Asian and European trading sessions also witnessed losses varying from 1.0% to 2.5% in their different exchanges. Producer Price Index figures out at the time of writing came in as expected, dropping by (-0.1%).Shares yesterday experienced their biggest one-day loss since June 2020, with Nasdaq 100 tumbling by 5.0%. Nevertheless, economists are pointing out that the vast losses seen represent just gains that apparently erroneously emanated from previous belief in recent weeks that the Fed was about to consider slowing down. In the meantime, Emerging-Market currencies are down as the central bank policies of larger economies and a strong dollar put obstacles on investment and growth. EM stocks fell overnight by 1.7%. While it is hard to envision a major dent in the Dollar, we feel that developments with Ukraine making advancements and more cooperation within the European Union ahead of winter could turn things around a bit.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The Euro picked up some value, although data released this morning paints a bad picture of heavy-duty activity. Industrial Production for July significantly contracted by (-2.3%) following an excellent June that was, in fact, upwardly revised. The expansion in June of 1.1% did not continue, only showing the devastation that has resulted from uncertainty over the Nord Stream pipeline.
As this source of energy is fully shut off for non-Russian allies, we expect a lot of coordination to make the best of a turbulent outlook that, for many, includes a recession. Maybe the shared currency can avoid falling too hard going forward.
GBP ⇑
The Pound is up following a tough Tuesday as global markets assessed the need for the Fed to keep increasing borrowing costs and forcing everyone else to adjust. Domestic inflationary gauges in the form of the Consumer Price Index and Retail Price Index came in basically as expected and demonstrated that price pressures are still there. Similar to the U.S., the supply-side PPI for the U.K. contracted by (-0.1%), surprising a bit since there was an estimate of expansion (0.9%).
Naturally, the Bank of England and the new administration under Prime Minister Liz Truss will have to work on getting the U.K. back on track as Brexit issues with the EU keep being litigated and the energy crisis sets challenges immediately ahead.
