Fed Members’ dovish comments cause the Dollar to slide

Yesterday’s markets

6th September 2017

  • AUD - Cash Rate: 1.50%
  • AUD - RBA Rate Statement
  • GBP - Services PMI: 53.2

Federal Reserve Governor, Lael Brainard, spoke at the Economic Club of New York yesterday. She mentioned the damages caused by Hurricane Harvey will have an effect on the monthly payroll data in the short term. However, the global outlook has improved and credit is flowing in the economy. Brainard also mentioned that the Fed have generally taken the view the monetary policy shouldn’t be the first line of defence against the build-up of imbalances. FOMC Member, Neel Kashkari, shared Brainard’s tones, explaining how the premature rate hikes might be harming the economy and could be the reason behind the low inflation and wage growth. Their dovish comments caused the Greenback to decline against its major counterparties overnight.

Less than two weeks after Hurricane Harvey, Hurricane Irma hit the Caribbean. The Hurricane is on the path to Florida and is the most powerful storm to form in the Atlantic Ocean. Thousands of people have already been evacuated from areas across the Caribbean with a mandatory evacuation order in Florida’s Key West.  The predicted damages figures continue to rise. It is estimated the direct hit on Miami is predicted to cause $200 billion worth of damage alone. 

Today’s markets

5th September 2017

  • AUD - GDP q/q
  • CAD - Trade Balance
  • USD - ISM Non-Manufacturing PMI

This morning, Germany; the largest economy in Europe, released the Germany Factory Orders figure. The figure posted worse than expected at -0.7% for July, after raising by 1% in June. The fall was caused by domestic orders which declined by 1.6% whilst foreign orders remained flat. Despite the bearish reading, the trend continues to point upwards.

Later today, Canada will release their trade balance figure, as well as interest rate and statement. Although it is not expected they will raise rates, some of the market are hoping the latest bullish GDP figure will help persuade the Bank of Canada for another hike. The Loonie has been gaining against most of its’ major counter parties with the possibility of surprise hike today.

Also, this afternoon the US will release the ISM Non-Manufacturing PMI and the Beige Book. With the Fed expected to raise rates another time this year, the markets will be closely watching the release of the Beige Book alongside the non-public Green and Blue Book. It is thought the FOMC will use this analysis to make their next rate decision.