US dollar under pressure
Mihir Kapadia, CEO and Founder, Sun Global Investments
The US dollar came under further pressure stemming from what we have seen for the majority of this year. The dollar's weakness this year has been fuelled by a steady unwinding of expectations of optimism about President Trump's stimulus plans, and some slight reduction of expectations of a further interest rate increase by the Federal Reserve policy increase in the coming months. Expectations of a US rate increase at its September meeting has all but evaporated from the market compared to a 20 per cent probability a month earlier; with Fed member Mester saying that she does not want to ‘over-react’ to weak inflation when more data will arrive before the September FOMC meeting.
Nevertheless, recent data has been encouraging. Last week's data showed the US economy GDP accelerated in the second quarter with market expectations focussed on jobs data this week. In contrast, yesterday’s ADP figure which has always been billed as a very accurate indicator of the Non-Farm Payroll figure was in fact printed lower than both forecast and previous at 178K, thus adding further concern on the US economy and dampening hopes of a US interest rate hike before the end of the calendar year.