Daily Market Color

Dollar Climbs On Future Rate Speculation

The US dollar continued its rise to a two-week high against major currencies today, appreciating 0.2% against the euro and 0.4% versus the yen, as summer trading volumes remain low and investors look to time a rate hike by the central bank.  In an interview this morning, Fed Vice Chairman Stanley Fischer reinforced his view that economic data will be the determining factor in the pace of raising borrowing costs.  He acknowledged that the labor market was near full employment, but other factors such as inflation, productivity, and interconnectedness to other worldwide central banks need be considered.  U.S. markets received further color from select data releases, beginning with new home prices rising 5.1% YoY, slightly below expectations of 5.2%, but still underlining a solid real estate market.  The Consumer Confidence Index displayed a 4.5-point jump in August to 101.1, citing strong labor statistics as the primary catalyst.   The level was the highest it has been in 11 months and well above predictions of 97.  The results generated brief gains in US equity markets early in the trading session before leveling off as the day went on.    

Alternatively, economic releases in Britain painted a much bleaker picture with the negative impact of the Brexit beginning to take shape.  In the U.K. real estate market, a mere 60,912 new mortgages were given out in July, marking the lowest number in over a year and a half.  Additionally, statistics showed the average advertised salary in Britain was down 2.4% in July compared to the previous year, as companies struggled with tightening budgets and delays in hiring decisions.  Overall, the U.K benchmark index, FTSE, finished slightly down on the day, while other European stock indexes were up near 1%.   Elsewhere, Japan provided positive household spending and labor figures today, highlighted by a seasonally adjusted 3.0% unemployment rate in July, the lowest mark for the country in over 21 years.  The news received a muted response in markets as the Nikkei finished just below even on the day as analysts attributed the low unemployment to a decreasing population.     

All three major U.S. stock indexes are currently trading down nearly 0.40%, as Apple dominates headlines in their struggle over taxes with the European Union.  U.S. Treasurys and swaps rates are flat to 3 bps higher versus yesterday’s close, with the 10-year yield near 1.57%.  Crude oil prices continue to fall as the dollar strengthens, down more than 1% again on the day.


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