Greenback weakens as signs of potential US slowdown increase…
The US dollar finally gave up ground against its peers yesterday, albeit a relatively small amount.
The catalyst for yesterday’s move came from a set of US manufacturing numbers which showed another decline towards the 50 threshold which defines expansion or contraction. The scene has already been set for a global slowdown. Germany has been contracting for a number of months, as have many other eurozone regions. Yesterday we also saw the UK’s manufacturing gauge slip into contraction territory in May, the first in a significant period of time.
While stock markets have been having a tough time of late, it’s been the debt markets which have been calling out the prospect of a much more significant slowdown. One which even brings up the infamous ‘R’ word! The US government debt market is now pricing in 0.93% of rate cuts over the next 12-months. It feels like it was only a few months back the Fed were on an aggressive path for higher rates. Now the opposite appears potentially true. Such a situation could have huge ramifications for the buck. The currency has remained the best of a bad bunch but are the Fed about to compromise its status?! We’ll find out soon enough as Fed chair Powell is set to deliver a speech on monetary policy just after US markets open today at 14.45. Keep your ears out for any dovish comments which may call into question the greenback’s ongoing strength.
Overnight the Reserve Bank of Australia have indeed lowered rates by 25bps to 1.25%. This was very much expected and has not created too much volatility across Aussie crosses. The accompanying statement did not confirm whether they’ll be taking action again anytime soon.
Written by Viv Savani. 8:09am, June 4th 2019
The details expressed in this market report are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. Cornhill International Payments limited accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.