Dollar in Recovery Mode, for now…

It’s a busy day on the economic calendar, with plenty for the markets to get through, global equity and currency markets expected to make some moves through the day, despite lighter volumes in the U.S, with a shortened day ahead of tomorrow’s public holiday.

In the early part of the day, the Dollar has managed to find its feet, following a pretty dire first half of the year, which had an unwind of the Trump rally to contend with, coupled with some pretty mixed economic data, growth in the 1^st quarter having disappointed with any improvement in the 2^nd certainly not likely to be the stellar growth many had expected when Trump surprised global markets with an unexpected victory last November.

The markets have been gripped by central banks in recent weeks and the week ahead is likely to be no different, with BoE Governor Carney scheduled to speak this afternoon. Carney caught the markets by surprise last week, with his shift in sentiment towards monetary policy coming soon after dovish commentary and views that monetary policy would remain neutral over the near-term.

This afternoon could deliver the pound with another blow, with the markets perhaps unsure on which way the pendulum will swing, though it would be hard to imagine the BoE Governor shifting back to dove, an uptick in the pound certainly needed to ease inflationary pressures that have been weighing on domestic consumption for some time.

At the time of the report, the pound is down 0.14% at $1.3007, though the decline has more to do with a recovery in the Dollar than any shift in sentiment towards the pound and BoE monetary policy that continues to be the driving force as Brexit discussions are ongoing in the background.

It’s not just Carney for the pound today, with June’s manufacturing PMI numbers also scheduled for release this morning, ahead of Carney’s speech, any positive numbers likely to add to the expectation of a move by the BoE in the coming months, whilst forecasts are for a slight easing, which would hold back any moves ahead of the BoE Governor’s speech.

Across the Channel, finalized PMI figures have been trickling out of Eurozone member states, with Spain’s manufacturing sector seeing the pace of expansion ease in June, weighing on the EUR, which has been under pressure through the day, following last week’s gains, as the Dollar looks to settle ahead of key stats this week.

Weak stats out of the Eurozone will confuse matters and whether the ECB will make a move sooner rather than later, though we don’t expect a weak month to have a detrimental impact on outlook, the view now being that the economy is in a good enough space for the ECB to shift from its neutral position.

While the pound and the EUR will be in focus, it’s ultimately going to boil down to the Dollar and stats out of the U.S, this being nonfarm payroll week. Data out of the U.S this evening includes the market’s preferred ISM Manufacturing PMI numbers for June, which are forecasted to be positive and should support Dollar gains made through the early part of the day, with the EUR’s 0.25% fall to $1.1397 aiding in the gains seen in the Dollar Spot Index ahead of key stats this week and the FOMC’ monetary policy meeting minutes.

At the time of the report, the Dollar Spot Index was up 0.26% at 95.877, the markets overshooting on the Dollar bashing of last week, with positive data today and through the week likely to restore some degree of confidence in the economy and the outlook for the remainder of the year.