Dollar soars as European Currencies Falter, ECB in Focus

Dollar soars as European Currencies Falter, ECB in Focus


The dollar index which measures the greenback against a basket of major currencies hit a two-month high of 96.53. The growing risks from Europe and fears of a global slowdown are boosting the dollar demand. The U.S. 10-year treasury yields fell below 3.10% for the first time in three weeks as investors rushed to the risk-free U.S. bonds.


The Euro traded at a two-month low against the United States dollar and the Japanese Yen following weaker-than-anticipated economic data from Germany and France. The data signaled that the growth in the Eurozone could be slowing down which would delay the normalization of the monetary policy. On the other hand, the tensions rising from Italy's budget plan are still weighing on both the Common currency and the European equities. Market participants await the European Central Bank interest rate decision today along with Mario Draghi's press conference to grasp clues about the interest rate path and receive the ECB's comments concerning Italy's situation. The bank is widely expected to keep monetary policy unchanged. The EURUSD traded at a low of $1.1379, and the EURJPY tumbled to 127.49.


The British pound tumbled to a six-week low against both the United States dollar and the Japanese Yen as market participants awaited Theresa May's speech to Conservative Party lawmakers in the parliament. Britain and the European Union couldn't yet reach a Brexit deal, as the border between Northern Ireland and Ireland remain a key issue. May received support from her party, but the pound failed to recover losses. The GBPUSD tested a low of $1.2867, and the GBPJPY traded at a low of 144.10.


The Canadian dollar was stronger against peers as the Bank of Canada raised interest rates by 25 basis points to 1.75%. The Bank of Canada said that interest rate would continue to rise to reach their neutral levels and expected the CPI to remain near the 2% level through summer 2020. The USDCAD fell to 1.2970.


The U.S. equities ended sharply lower with S&P500 and Dow Jones turning into the red territory for the year. The growing concerns about a global economic slowdown and weaker corporate earnings weighed on major indices. The Dow Jones Industrial Average futures lost 2% to 24722, the S&P500 futures fell 2.5% to 2672, and the Nasdaq futures tumbled 3.6% to settle at 6876, the lowest since May.


Gold prices traded near a three-month high at $1239 during the Asian session as the sell-off in the global equity markets boosted the demand for the safe haven. The silver ounce is hovering near a three-week high at $14.75.


Oil prices remain weak, weighed down by Saudi Arabia's promise to keep the oil markets well-supplied and the buildup in U.S. crude inventories. Since the Saudi energy minister announced that the kingdom would play a main and responsible role in the global energy markets, the prices lost more than 5%. On the other hand, the Energy Information Administration reported that the weekly U.S. crude oil inventories increased by 6.346 million barrels last week. The West Texas Intermediate crude futures settled at $66.36 per barrel, while Brent futures closed at a two-month low of $75.64 per barrel.

Major Economic Events

GMT Country Event Expectation Previous
8:00 EU German Ifo Business Climate Index 103.1 103.7
11:45 EU ECB Interest Rate Decision (Oct) 0.00% 0.00%
12:30 EU ECB Press Conference    
12:30 US Core Durable Goods Orders (MoM) (Sep) 0.5% 0.1%
12:30 US Initial Jobless Claims 214 210
14:00 US Pending Home Sales (MoM) (Sep) -0.1% -1.8%


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