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The US Dollar Index dropped by the most since more than a month. Although the US Dollar fall is set to continue, the direction will depend heavily on incoming US data. On Wednesday, the ADP private employment report and another estimate of Q2 GDP growth will be released. Consumer inflation data will be released on Thursday, followed by Nonfarm Payrolls on Friday. These numbers could further impact the US Dollar if they continue to soften expectations of monetary policy tightening.
Increased risk appetite, brought on by rising commodity prices and soaring Wall Street stock prices, was another reason that devalued the currency. The Nasdaq rose 1.74%, while the Dow Jones increased by 0.85%. Prices for crude oil increased by almost 1.5%.
Economic Data
Consumer confidence in the US declined in August, dropping from 114.0 (revised from 117.0) in July to 106.1 according to the Conference Board. According to additional information in the paper, the Consumer Expectations Index fell to 80.2 from 88 and the Present Situation Index fell to 114.8 from 153.0.
The US JOLTS Job Openings and CB Consumer Confidence data came in below expectations, leading to a sharp drop in US Treasury yields. The 10-year yield fell from 4.20% to 4.11%, reaching its lowest level in two weeks. The DXY index broke below 104.00, falling below 103.50.
EUR/USD rebounded from below 1.0800 and approached the 20-day Simple Moving Average (SMA). On Wednesday, Spain and Germany will release their preliminary August Consumer Price Index (CPI) figures, which will be critical for expectations regarding the actions of the European Central Bank at the September meeting.
The weaker US Dollar pushed GBP/USD towards the 1.2650 resistance area. EUR/GBP continued to rise, surpassing 0.8600 to reach its highest level in two weeks. On Wednesday, the UK will report lending data.
AUD/USD is trading above the 20-day SMA after a sharp rise from 0.6415 to 0.6480. On Wednesday, Australia’s July Monthly Consumer Price Index (CPI) is due, and it is expected to decline to 5.2%.
USD/JPY reversed sharply from its highest level since November, falling below 146.00 after nearing 147.40. Japan will report Consumer Confidence data on Wednesday.
USD/CAD retraced from monthly highs at 1.3640 to 1.3555, reaching its lowest close in five days. The correction is expected to continue, but it will depend on US data not surprising the market.
Gold jumped, boosted by lower Treasury yields, reaching $1,937, the highest level since August 8. Silver finally broke above $24.40 and surged to $24.75. Cryptocurrencies also enjoyed a rally, with Bitcoin soaring 6.75% to $27,725.
Building Permits data will be made available early on Wednesday in New Zealand and later in Australia. The Australian Monthly Consumer Price Index for July will be the most important report of the Asian session. Data on consumer confidence will be released later in Japan. The US ADP Employment Report and early inflation data for Germany are also forthcoming.
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