NY Open: Central banks unleash dollar bears

No one is asking “who let the dogs out?’ The question de jour instead is “who let the dollar bears out?” The US dollar retreated across the major G-10 spectrum since New York opened. The answer may be a combination of US inflation disappointment, the ECB, and Turkish central bank actions.

US August CPI was weaker than expected but the disappointment was tempered to a degree by the robust Initial jobless claims data.
The ECB left rates unchanged to no one’s surprise and confirmed that the net asset purchase program (non-standard) monetary policy would continue until December. Markets were concerned that the program would be extended due to the Turkey crisis. Draghi warned of rising risks from trade disputes, financial market volatility, and emerging market volatility.

Turkey took a big step in alleviating some financial market stress today when they hiked interest rates by 6.25% to 24.0%. USDTRY plunged to 6.0200 from 6.3850.

Wall Street opened with gains led by the Nasdaq which was yesterday’s worst performing index of the US “big three.” The gains are being attributed to improved sentiment stemming from the US offer to restart trade talks with China. The Nasdaq is bolstered by a 1.61% gain in Apple (AAPL: xnas) which more than reversed yesterday’s 1.29% decline.

The Bank of England monetary policy meeting lived up to its “non-event” expectations. They left interest rates unchanged at 0.75% and warned of increased risks from Brexit. 

GBPUSD soared after France’s Europe Minister Nathalie Loiseau said that although the EU27 were united and they won’t bend the rules, there was good will. Stretched short GBPUSD positions may have exacerbated GBPUSD gains from 1.3028 to 1.3122.

USDCAD traded lower in line with the broad greenback weakness, The US/Canada trade talks have stalled, and despite reports to the contrary, access to Canada’s dairy industry and the dispute resolution mechanism continue to be stumbling blocks.