USD Broadly Higher Amid Trade Tensions and Emerging Market Problems

Market Reviews

The British pound declined after the release of a report testifying to the fall of the Purchasing Managers Index (PMI) for the UK construction sector in August to a 3-month low. UK construction PMI declined significantly to 52.9 in August from a 14-month high of 55.8 in July. The result was also below the expected 55.0 level.

Pressure on the euro intensified today, as renewed demand for the US dollar provoked a decline in the single currency. The EUR/USD pair marked 7-day lows. Eurozone producer prices rose slightly in July. Eurostat reported, that Eurozone producer price index (PPI) rose 0.4% month-on-month in July against market expectations of a 0.3% rise. Year-on-year, producer prices rose 4.0% in July, against market expectations of a 3.9% gain.

The US dollar receives support from growing concerns about the global trade war. US President Donald Trump threatened to exclude Canada from the NAFTA deal on the eve of the next stage of negotiations this week. USD strengthens broadly today, in particular against commodity currencies.

New Zealand dollar is trading as the weakest one, followed by Canadian dollar. Canadian currency is pressured by NAFTA talks. US-Canada trade negotiation will restart this week but there is little hope of any progress.

European stocks fell today. CAC lost 1.61%, DAX dropped by 1.36% and FTSE fell by 0.72%. Meanwhile, Asian markets were higher today. The Chinese SSE rose 1.1% to close at 2750.58. Hong Kong HSI rose 0.94% and Singapore Strait Times gained 0.10%. Nikkei fell slightly by 0.05%.

The Bank of England Governor Mark Carney said he was ready to stay in his job beyond his planned leaving date (June 2019), saying he was willing to do what he could to ease Britain's economy through its departure from the European Union. BoE Governor aims to help Britain through Brexit which is scheduled to happen in March next year. "Even though I have already agreed to extend my time to support a smooth Brexit, I am willing to do whatever else I can in order to promote both a smooth Brexit and an effective transition at the Bank of England," Carney told lawmakers on parliament's Treasury Committee.

Today’s data also showed, that UK BRC sales monitor grew 0.2% yoy in August. Swiss CPI rose 0.01% mom, 1.2% yoy in August, versus expectation of 0.0% mom, 1.0% yoy. Australia current account deficit widened to AUD -13.5B in Q2.