The weakness in the US dollar has continued through to the start of the third quarter, with improving US economic data – dominated by cooling inflation – hitting forecasts hard for the greenback.
At the time of writing, the US Dollar Index, a measure of the value of the dollar against a weighted basket of major currencies, was trading below 100, down by about 3 per cent in July.
Since we last spoke, inflation fears continue to retreat; the most recent Consumer Price Index and Producer Price Index reports showed that price pressures came in at 3 per cent and 0.1 per cent year on year, respectively (versus 4 per cent and 0.9 per cent previously).
Watch: US Federal Reserve raises interest rates for 10th consecutive time
The most recent payrolls report released on July 7 showed that only 209,000 jobs were added in June, well below the expected 225,000 jobs.
So much of the US Federal Reserve's expectations regarding future rates has been dictated by inflation and employment and with July’s data showing continued signs of cooling on both fronts, we are now in a situation where we find the US dollar under heavy selling pressure.
Whether this proves to be premature remains to be seen.
One thing we know for sure is that come the next Fed meeting, which concludes on July 26, we will have another interest rate increase, taking the overall rate to 5.5 per cent.
According to the CME Group’s FedWatch Tool, markets are already pricing this in with a 96 per cent certainty.
The easing inflation threat and cooling US jobs market then begs the question: Other than July, will the Fed look at one or two more rate increases in 2023?
Or could we be in situation whereby we will not have another rate increase in 2023 following July’s action?
Looking ahead and using the same CME tool, markets are pricing in an 83 per cent chance of a hold during the September meeting, a 67 per cent hold in November and a 58 per cent chance that rates will end the year at 5.5 per cent in December.
It will be interesting to see how these values change over the course of the next few weeks and months – and will be entirely reliant on the coming US data.
Softening inflation and the labour market will continue to put pressure on the US dollar. As a result, there will be more upside for major currencies against the greenback and also upwards momentum in US stocks.
With so much of the fundamental picture dependent on data, technicals may provide a bit of clarity when it comes to how low the US Dollar Index could fall.
Following the psychological break of the 100 level, near-term support in the index kicks in at 99.30 levels – and a break of this could expose a level of 96.30 before we begin the fourth quarter.
Keep an eye on the US jobless claims on Thursday, which shows how many people file for unemployment benefits every week in the US.
Any falling number will lead to dollar weakness in the short term and vice versa.
This will precede the July Fed meeting, which concludes on Wednesday night, with the decision due out at 10pm Dubai time.
Pay attention to forward guidance from the Fed. While recent speakers have continued to allude to the inflation threat, this message could be repeated.
However, I do believe markets will shrug it off and continue piling into higher-yielding assets, which will keep the dollar under pressure.
Meanwhile, earnings season is in full flow and will, no doubt, be critical to future guidance of equity pricing.
On Wednesday, Tesla, Netflix and IBM will announce their results after market close.
Microsoft and Google owner Alphabet will announce their results next Tuesday, followed by Meta on July 26 and Amazon on July 27.
Again, it is important to note that markets have already priced in a weaker earnings season.
Earnings are expected to drop by more than 7 per cent to their lowest since 2020, so it is best to focus on companies' comments on their views of forward guidance.
THE BIO
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Role Model: Sheikh Zayed, God bless his soul
Favorite book: Zayed Biography of the leader
Favorite quote: To be or not to be, that is the question, from William Shakespeare's Hamlet
Favorite food: seafood
Favorite place to travel: Lebanon
Favorite movie: Braveheart
MATCH INFO
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Ronaldo (14'), Bale (72')
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Tamkeen's offering
- Option 1: 70% in year 1, 50% in year 2, 30% in year 3
- Option 2: 50% across three years
- Option 3: 30% across five years
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Key products and UAE prices
iPhone XS
With a 5.8-inch screen, it will be an advance version of the iPhone X. It will be dual sim and comes with better battery life, a faster processor and better camera. A new gold colour will be available.
Price: Dh4,229
iPhone XS Max
It is expected to be a grander version of the iPhone X with a 6.5-inch screen; an inch bigger than the screen of the iPhone 8 Plus.
Price: Dh4,649
iPhone XR
A low-cost version of the iPhone X with a 6.1-inch screen, it is expected to attract mass attention. According to industry experts, it is likely to have aluminium edges instead of stainless steel.
Price: Dh3,179
Apple Watch Series 4
More comprehensive health device with edge-to-edge displays that are more than 30 per cent bigger than displays on current models.
Result
UAE (S. Tagliabue 90 1') 1-2 Uzbekistan (Shokhruz Norkhonov 48', 86')
Skoda Superb Specs
Engine: 2-litre TSI petrol
Power: 190hp
Torque: 320Nm
Price: From Dh147,000
Available: Now
Who are the Sacklers?
The Sackler family is a transatlantic dynasty that owns Purdue Pharma, which manufactures and markets OxyContin, one of the drugs at the centre of America's opioids crisis. The family is well known for their generous philanthropy towards the world's top cultural institutions, including Guggenheim Museum, the National Portrait Gallery, Tate in Britain, Yale University and the Serpentine Gallery, to name a few. Two branches of the family control Purdue Pharma.
Isaac Sackler and Sophie Greenberg were Jewish immigrants who arrived in New York before the First World War. They had three sons. The first, Arthur, died before OxyContin was invented. The second, Mortimer, who died aged 93 in 2010, was a former chief executive of Purdue Pharma. The third, Raymond, died aged 97 in 2017 and was also a former chief executive of Purdue Pharma.
It was Arthur, a psychiatrist and pharmaceutical marketeer, who started the family business dynasty. He and his brothers bought a small company called Purdue Frederick; among their first products were laxatives and prescription earwax remover.
Arthur's branch of the family has not been involved in Purdue for many years and his daughter, Elizabeth, has spoken out against it, saying the company's role in America's drugs crisis is "morally abhorrent".
The lawsuits that were brought by the attorneys general of New York and Massachussetts named eight Sacklers. This includes Kathe, Mortimer, Richard, Jonathan and Ilene Sackler Lefcourt, who are all the children of either Mortimer or Raymond. Then there's Theresa Sackler, who is Mortimer senior's widow; Beverly, Raymond's widow; and David Sackler, Raymond's grandson.
Members of the Sackler family are rarely seen in public.
McIlroy's recent struggles
Last six stroke-play events (First round score in brackets)
Arnold Palmer Invitational Tied for 4th (74)
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Sinopharm vaccine explained
The Sinopharm vaccine was created using techniques that have been around for decades.
“This is an inactivated vaccine. Simply what it means is that the virus is taken, cultured and inactivated," said Dr Nawal Al Kaabi, chair of the UAE's National Covid-19 Clinical Management Committee.
"What is left is a skeleton of the virus so it looks like a virus, but it is not live."
This is then injected into the body.
"The body will recognise it and form antibodies but because it is inactive, we will need more than one dose. The body will not develop immunity with one dose," she said.
"You have to be exposed more than one time to what we call the antigen."
The vaccine should offer protection for at least months, but no one knows how long beyond that.
Dr Al Kaabi said early vaccine volunteers in China were given shots last spring and still have antibodies today.
“Since it is inactivated, it will not last forever," she said.
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