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No Breaks for Dollar Bulls

by Sean Coakley | September 7, 2016

As hopes for a Federal Reserve rate hike this month recede global equity markets remain on a solid footing while the mighty US dollar continues to slip.  Despite today’s claims from Federal Reserve member Williams that the US economy remains on pace to create more jobs than necessary to move much quicker than the market currently anticipates on the rate front, dollar bulls just can’t catch a break as the buck continues to languish in the wake of Friday’s mediocre job report.

With the fall in the buck came a rise in the yen sparking losses on the Nikkei exchange and adding to a mixed performance across Asian markets. Looking southwards the Australian dollar is continuing to hold onto the gains seen after the RBA’s rate statement despite slower than expected GDP growth, while its Kiwi counterpart does the same, likely supported by improved sentiment seen across the commodity complex.

Looking to Europe the pound has pared part of the gains seen over the course of the last few trading sessions with it losing ground against the bulk of its peers in light of profit taking and worse than expected manufacturing data in the UK economy. Despite this, European equities appear to be on a solid footing across the board while the euro treads water as traders anticipate a continuance in the current policy framework ahead of Thursday’s monetary policy decision from the ECB.

Ahead of the open stateside it appears that the positive tone struck in Europe is likely to push Wall Street to record levels upon market opening.  As the market’s reckoning of the probability of a September rate rise slide substantially in the wake of Friday’s job report, equities have found support in prospect of continued monetary ease while dollar bulls remain disappointed. On deck for later today is the Bank of Canada’s rate announcement, as it contends with mediocre economic performance against the backdrop of growing concerns regarding the potential for instability in the financial and real estate sectors, the likely monetary prescription is to stay the course.  This is also in line with consensus forecasts however we can be sure that traders will parse through every line of Bank governor Poloz’s commentary, should they find something they do not like we can expect a bumpy flight for the loonie.

Best of Luck,

 

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