Daily Brief

US dollar down again

Going postal

A subset of the US President’s re-election strategy is his attempt to disable the US Postal Service, so that it cannot deliver the postal votes which he fears will be for his opponent. The Democrats are fighting back and speaker Nancy Pelosi wants the House to reconvene next week. 

On its own, that would be an odd story, but it is also part of the President's narrative that “the only way we're going to lose this election is if the election is rigged”. The Presidential fingerprints are also to be found on the failure of Congress to deliver a new round of fiscal stimulus. Republicans cannot agree with the Democrats’ plan to provide direct aid to state and local governments. 

So there was more than one reason on Monday for investors to persist with their recent scepticism about the US dollar. More could emerge if the Democratic National Convention changes opinion about the outcome of the election and its possible impact on the US economy. The result yesterday was clear enough though, with the USD taking last place, an average of 0.4% lower against the majors. It gave up two fifths of a cent to sterling.

Safety first

In what used to be a normal conjunction, precious metals and the safe-haven Japanese yen both did well from misgivings about the United States. Gold was back above $2000, within 0.25% of its record high, and the JPY led the currencies with a 1% gain over the USD. Sterling was in the middle, just about flat against the EUR and CHF.

The economic data played no obvious part. US numbers painted a mixed picture. The New York Fed’s manufacturing survey was less vibrant than expected, down by 13½ at 3.7. The NAHB housing market index, meanwhile, matched its 78 record high. There are signs that high prices for bonds and equities are encouraging investors to diversify into depressed commercial property funds and new-build housing.

Overnight, the minutes of the Reserve Bank of Australia board meeting were of little help to the Aussie. There was no hint of further easing but potential buyers were not motivated by the idea that “this accommodative approach would be maintained for as long as necessary”. The AUD came out of it well enough though, strengthening by an average of 0.2%

Brexit’s back

The Prime Minister will be pleased to see Brexit back in the news today, creating a welcome diversion from exam results and the pandemic. Trade discussions will recommence in Brussels, kicking off a four-day multi-level meeting. Downing Street is optimistic that a post-Brexit deal can be agreed in September.

Brexit talks are not the only agenda item today but the support acts do not look too promising. For example, there are none from Europe.

Today’s ecostats come after lunch with US housing starts and building permits. And that’s the lot. There will be nothing else until NZ producer prices tonight, followed by Japanese machinery orders and the balance of trade.

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