Dollar Looks to Hold Modest Gains Despite Low PPI 

 

USD

The dollar continued its modest run of gains overnight.  The Bloomberg Dollar Spot Index is higher for the fifth straight day.  While the gains are mostly unimpressive, it is the longest winning streak since March.   The dollar gained the most against the New Zealand dollar after the central bank changed its language to show it is uneasy with the currency’s strength.  Some argue this is a first step before the Reserve Bank of New Zealand would physically intervene in currency markets.

This morning’s economic data has not helped the greenback.  Producer prices registered lower than expectations and weekly jobless claims came in slightly worse.  Total PPI fell 0.1% in July, missing expectations of a 0.1% increase. The so-called core reading that excludes food and energy fell 0.1%, lower than the 0.2% increase expected. 

Later this morning, the Federal Reserve’s William Dudley will hold a press conference.  Dudley could hold a hawkish tone this morning on the back of last week’s strong job and wage data.  Failure to do so would likely cause the greenback to erase its recent, modest gains.    

 

EUR

The Euro experienced a sharp drop in early trading yesterday and touched a monthly low versus the U.S. dollar.  The Euro quickly recouped those losses and the move went unexplained.  The Euro slipped some overnight and tested lows seen yesterday during the minor crash.  French industrial production fell 1.1%, worse than already dour expectations of a 0.6% contraction. 

Despite the Euro’s struggles, slightly lower U.S. producer inflation data has weighed on the greenback somewhat to the Euro’s benefit.  

 

GBP

The British pound remains on the defensive even after decent economic data.  U.K. industrial production rose 0.5% in June giving the sterling an initial boost.  However, a breakdown of the print showed that manufacturing was flat and construction output fell 0.1%.  A separate report showed that the U.K.’s trade deficit unexpectedly widened.  

The sterling is about half a percent weaker versus the U.S. dollar over the past three trading sessions.