Dollar Firmer On Solid US Data

Pound Reaches "End of the Road" as King Dollar Returns Says HSBC

The Pound and Euro have reached the "end of the road" according to a new analysis from HSBC as analysts hail the return of the "king dollar". HSBC is the second major British bank to have recently signaled a turning point has been reached for the Pound with Barclays saying last week it was now "less hopeful" on the Pound. Both have been bullish on the UK currency in the first half of this year, but the tide is turning according to Paul Mackel, Global Head of FX Research at HSBC, "King Dollar has already been making a comeback but its reign can last longer," he says. HSBC was amongst the first of the major institutions to turn constructive on the British Pound's prospects back in late 2022, a call that came in the wake of the market disruptions sparked by the short-lived premiership of Liz Truss. Sterling duly rose against both the Euro and Dollar over the subsequent months with outperformance lasting into early August 2023. "We have been upbeat on EUR and GBP since November 2022 but think the rally in each currency has played out and look for a reversion lower in the months ahead," says Mackel in a research note issued in early September. HSBC notes consumer confidence has taken a turn in the UK and Eurozone, and this tends to precede macroeconomic underperformance. "It is hard to see much cyclical upside for these currencies," says Mackel.

Euro posts lowest close in 3 months vs Dollar

EUR/USD posted its lowest daily close in three months, just below 1.0700. The Euro appears vulnerable, moving with a clear downward bias and showing no signs of stabilization. The final release of Germany's Consumer Price Index is upcoming, and no surprises are anticipated. Looking ahead, the European Central Bank (ECB) will hold its monetary policy meeting next week, and there is currently no clear consensus on what actions it may take regarding interest rates.

Data already released: German Final CPI m/m unchanged 0.3% as expected.

Dollar charges toward longest weekly winning streak since 2014

The Dollar was headed for its longest weekly winning streak in nine years on Friday, bolstered by a resilient run of U.S. economic data that has also put the end of the Federal Reserve's aggressive rate-increase cycle into question. The Dollar gained again yesterday after earlier pushing the yen to a 10-month low and driving the Euro and Sterling to their weakest levels in three months, bolstered by a still-resilient U.S. economy that has defied expectations despite aggressive tightening by the Federal Reserve. Against a basket of currencies including the Euro and Sterling, the Dollar rose 0.2% to 105.03, after earlier touching a fresh six-month peak. The index also climbed to a six-month high on Tuesday, as the U.S. services sector unexpectedly gained steam in August. More data released yesterday further pointed to an overall tenacious U.S. economy. "It's all about U.S. outperformance relative to the rest of the world economically," said Brad Bechtel, global head of foreign exchange at Jefferies in New York. "The fundamental story in the U.S. is still a bit stronger than the rest of the world. That continues to be a huge catalyst for Dollar strength."

?