Dollar Mixed while Stocks Slide to Begin Last Week of Q3

The US dollar is narrowly mixed.  The euro, yen and Swiss franc are higher, while the
dollar-bloc and sterling are softer.
  The moving element here is
not so much the greenback, which serving more as
a fulcrum, but idiosyncratic, country-level

The yen is the strongest of the majors.
The dollar was turned back from above JPY101 and is now through the pre-weekend
low near JPY100.70, is being driven be equity market losses and a belief that
the shift in the BOJ’s framework from targeting the monetary base to the yield
curve will do nothing to stem the yen’s year-long appreciation.  The
effort to steepen the yield curve may help solve one issue, the squeeze on
banks and insurers, but exacerbates another, namely the recycling of Japan’s
current account surplus and foreign investment inflows.  

Germany’s IFO surprised on the upside after
last week’s flash PMI fell to 16-month lows. 
The business climate
reading jumped to 109.5 from 106.3.  This
the highest reading since May 2014.  The current assessment rose
to 114.7 from 112.9, and the expectations
component rose to 104.5 from 100.1.  The market had expected mostly flat

Germany’s largest bank remains under pressure. 
A press report in Germany indicated that Merkel has ruled out state assistance
and will not assert itself large fine sought by US regulators.  
German financials are the weakest sector
today, losing 2.8%, while the overall market is down half as much.  

Spain may have taken a modest step toward
resolving its nine-month political deadlock.
  The success of the PP in
Galicia, where it secured a majority, and the success of the Basque
Nationalists Party, may sap the ability and/or
willingness of the Socialists to continue blocking a minority government led by
Rajoy in Madrid.  They will have until the end of October or face the
third set of national elections in a year.  

Like last Friday, the euro has been confined to last Thursday’s trade range. 
The high that day was almost $1.1260, which was just above the retracement objective near
$1.1250.   The range is about than a quarter of a cent today.  

Sterling has been unable to resurface of
  This is a continuation
of the heavy tone seen since the middle of the month.   There has been increased speculation that Article 50 will
be triggered, but there has been no clear indication from 10 Downing
Street.  Some are linking sterling’s weakness to quarter-end position and
hedging adjustments.     The pre-weekend low was set near $1.2915.  It has barely held
today.  The mid-August low, which would be the next obvious target, is
found near $1.2865.  

The dollar-bloc currencies are slightly lower but have managed to shrug off some poor
  New Zealand reported an August trade deficit three-times
greater than the July shortfall and half again as large as expected. 
Exports fell, and imports rose.  The
Australian dollar is holding above $0.7600 as last week’s suggestion by the
central bank’s Lowe of the possibility of lower rates is shrugged off. 
The Canadian dollar is the heaviest. It is extending the pre-weekend losses
that were spurred by disappointing retail
sales and inflation data.  The immediate objective is the month’s high for the US dollar near

The remainder of today’s session features
speeches by Draghi and Nowotny of the ECB
and Tarullo and Kaplan of the Federal Reserve.  
Bank of Canada’s
Poloz will also speak late in the session.  The US reports new homes sales
for August, which are expected to pare back the outsides 12.4% gain seen in

The first US presidential debate will be held
in the North American evening that will correspond to the start of the Asian
session on Tuesday.
   The Real
Clear Politics
average of polls has Clinton at 46.5% and Trump at
43.7%.  A week ago, the poll average was virtually even at 44.9% to 44.0%
for Clinton.  Of the last 183 polls through Sunday, Clinton was ahead in
155 and Trump in 21, with seven
ties.  Of the 100 polls, Clinton was
ahead in 85, and Trump led in 11. 
There were four ties.



Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email