USD: Sell-off takes a breather - MUFG

Derek Halpenny, European Head of GMR at MUFG, suggests that the dollar was vulnerable and that near-term risks were clearly to the downside which was certainly evident again yesterday as concerns persist over the health of the US economy after the weaker than expected Q2 GDP report.

Key Quotes

“Interestingly, given the strength of consumer spending in Q2, the early indications for July are that consumers continue to spend. Total vehicle sales for July, released yesterday, were much stronger than the Bloomberg consensus. However, light-vehicle sales were weaker while price discounts may have helped the overall data as well. The ADP report today should indicate continued labour market strength and ease concerns over the health of the US economy.

Developments in US presidential election campaigning point to the markets attaching a smaller probability to a Trump victory that might help the dollar at the margin. Donald Trump has refused to endorse House Speaker Paul Ryan in a primary election next week. Retiring New York Republican, Richard Hanna has become the first member of Congress to publicly state he will be voting for Clinton in the election. Other prominent Republicans have done the same confirming that the Republican Convention in Cleveland has failed to unite the party behind Donald Trump.”