Stock Market Wobbles Keep The Dollar Up

GBP

After a torrid week of trading, which has seen sterling give up over two cents against the dollar, it found some support yesterday. Reports that interest rate traders are now discounting three rises next year, taking base rate to 0.75% combined with quarter-end encouraged traders to cover their short positions helped sterling recover some poise. With the European Central Bank still lagging in the race to tighten policy, sterling needed little encouragement to improve against the single currency.

However, it has given back some gains this morning in quiet trading against a backdrop of nervous stock markets. The only report scheduled for release in the UK today is the Markit Purchasing Managers Index (PMI) for September

EUR

It was the euro’s turn to suffer yesterday against the rampant dollar, and it fell sharply, creating a new low for the year before recovering some ground late in the day. With quarter-end out of the way, attention will turn to a full calendar of European data. As the markets opened this morning, Germany released retail sales for August that were lower than the consensus estimates countering the optimistic unemployment data released yesterday.

Later this morning, Eurostat will release the preliminary Consumer Price Index for the Eurozone, which is expected to show a year-on-year rise of 3.3%. Also on the agenda are Markit’s PMI for Europe forecast to be slightly lower than last month and a speech from Isabel Schnabel of the European Central Bank.

USD

After lower than expected weekly jobless figures and slightly better GDP failed to excite the markets, attention turned to Wall Street late in the afternoon as equities began being aggressively sold.

With the stock markets heading south, risk sentiment soured, and the dollar again rallied on its safe-haven status. Investors are traditionally nervous in October. After the US stock markets suffered their worst month since March 2020, some are expecting further weakness ahead, which will keep the dollar in demand if it occurs. This afternoon, more inflation data for the US is released.

Traders will focus on the Core Personal Consumption Expenditure for August, which analysts expect to be unchanged from July at 4.2 %. We also have speeches from the Federal Reserve’s Patrick Harker and Loretta Mester on the agenda.