The Dollar Nightmare Continues

Any hopes of a rebound in the Dollar were quashed on Monday afternoon, with FOMC non-voting member Bullard holding is dovish outlook on monetary policy, stating that he is comfortable where rates are at the moment, whilst supportive of the FED beginning to sell down the balance sheet from next month. Speaking later in the day, Kashkari held back on giving his outlook on monetary policy, whilst both were of the view that inflation continued to remain soft, justifying their current sentiments towards interest rates.

The markets were largely uninterested in Bullard’s view on when the FED should begin selling down the balance sheet, with the general consensus having been around next month, though it remains to be seen whether September will be the month, following the lack of commitment to a timeframe in the last FOMC meeting.

A lack of stats through the start of the week has certainly not helped the Dollar, with the Dollar Spot Index falling to an intraday low 93.238, before recovering to 93.353 at the time of the report, which is still a 0.08% decline on the day, from already low levels.

Material stats out of the U.S today is limited to June’s JOLTs job openings, which will provide some direction for the Dollar, but with the numbers dated and July’s nonfarm payrolls having already come in ahead of expectations, it’s hard to see the Dollar finding any major upside, leaving the Dollar in the hands of the less influential Redbook, with concerns over consumer consumption bringing the Redbook into the market’s radar.

Across the pond macroeconomic data out of the UK was limited to this morning’s July BRC Retail Sales Monitor, which came in ahead of forecast, whilst easing from June’s bounce, the increase in the sales monitor coming off the back of rising food sales, with non-food sales on the slide, a theme that is likely to persist as discretionaries begin to take a hit with the economy’s negative outlook and the effects of above BoE target inflation on consumer prices.

The pound’s gains through the early part of the day had as much to do with Dollar weakness than a shift in sentiment towards the UK economy, though there are still hopes that this week’s trade data and manufacturing production figures will impress

Across the Channel, economic data out of the Eurozone was limited to this morning’s June trade data out of Germany, which came in ahead of forecasts, with Germany’s trade surplus widening to €21.1bn, the German economy continuing to improve, supporting the positive sentiment to the wider Eurozone economy.

The EUR’s rebound to $1.18 levels will reignite talk of $1.20 and beyond, which is certainly becoming all the more reasonable a forecast, as the markets begin to brush aside stats out of the U.S that are unlikely to influence the FED, including nonfarm payrolls, any hopes for the Dollar now largely hinged on Friday’s inflation numbers.

At the time of the report, the EUR was up 0.10% at $1.18073, with the pound up just 0.03% at $1.30383, with the Dollar likely to find some support ahead of today stats, current levels drawing in a few bulls, though it does seem hard to expect any material upside for the Dollar.