Dollar Slide Continues – No End in Sight?

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Market Drivers September 8, 2017
Dollar hits 3-year lows vs. euro
Chinese Trade misses
Nikkei -.59% Dax -0.11%
Oil $49/bbl
Gold $1353/oz.

Europe and Asia:
CNY Trade 41B vs. 48B
EUR GE Trade 19.5B vs. 20.3B
GBP UK Manufacturing Production 0.5% vs. 0.3%

North America:
CAD Employment 8:30

The greenback continued its slide against all the major trading partners, hitting multi year lows against the euro, Aussie and loonie.

Sentiment against the dollar remains extremely negative as traders have given up all hope of another Fed rate hike before the end of the year. NY Fed President Bill Dudley, who just a few weeks ago sounded a hawkish tone, dropped any mention of a possible rate hike in comments overnight which only added to the buck’s woes.

With Hurricane Irma now barreling towards the United States forecasters are becoming concerned that the center of the storm could move straight up the Florida peninsula putting both Miami and Orlando within its path,. If that turns out to be the case the property damage could be in tens of billions of dollars and would force US monetary policy makers to maintain an accommodative policy in order to help three top twenty US metropolitan areas rebuild. In addition, traders are also concerned about another ICBM test from North Korea which will be celebrating the birthday of the Republic on Saturday, September 9th.

In short the upcoming weekend is setting up as a possible massive risk event and traders may want to stand down from dollar denominated assets until the danger passes. In clear sign of jangled nerve, the greenback broke the 108.00 figure against the yen and the pair shows no signs of stabilizing. If the North American session turns into a run for the exits stampede, USDJPY could drop below the 107.00 figure before the weekend.

On the economic front, the US calendar is light, but Canada will report its labor data at 12:30 GMT. There is no doubt that the loonie has been the most powerful G-7 currency as of late. The pair, boosted by a hawkish BOC and surprisingly robust GDP growth has been on a one-way trip towards the key 1.2000 support level. Although the BOC appeared to indicate that its surprise rate hike this week may be the last one for the foreseeable future if the Canadian economy continues to surprise to the upside the BOC may have to tighten monetary policy again.

To that end, today’s Canadian employment data is sure to be the focus of the market as loonie longs try to press the pair towards the long term 1.2000 support. If the labor numbers which are expected to print at 19K exceed estimates, USDCAD could see 1.2000 as the day proceeds.

Boris Schlossberg
Managing Director

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