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Dollar Hits Third Straight 2018 High as Divergence Re-Emerges

Oct 26 • Morning Roll Call • 70 Views • No Comments

(Bloomberg) — A relatively upbeat Mario Draghi did little to dent the dollar’s rip higher as investors re-focused on the divergent U.S. and euro-area economies.

The greenback set a 2018 high for a third straight day even as the European Central Bank chief said risks to euro-area growth remain “broadly balanced,” as he kept rates at zero. His comments came after a slate of dismal European figures, including a Purchasing Managers’ Index report that showed euro-area growth slowed.

That’s in contrast to the economic picture in America, according to Citigroup Inc., given the strength of U.S. leading indicators and the Federal Reserve’s commitment to hiking rates. While ECB officials were “as optimistic as they could be,” that wasn’t enough to crimp the greenback’s strength, said Calvin Tse, Citigroup’s North American head of G-10 FX strategy.

“Investors have been wanting to buy the dollar on the back of data divergence,” Tse said. “The better investment opportunities — high growth, high yields, a deep pool of liquid safe assets — in most scenarios, you want to be buying the U.S. dollar.”

The dollar rose against most of its Group-of-10 peers Friday, with the Bloomberg Dollar Spot Index climbing 0.1 percent to the strongest level since June 2017. The euro fell 0.1 percent to $1.1366, not far above its year-to-date low.

Investors will get their next update on the state of the U.S. economy with Friday’s third-quarter gross domestic product reading. Growth likely cooled to a 3.3 percent annual rate of expansion, according to a Bloomberg survey, from 4.2 percent in the prior period, which was the quickest since 2014.

ECONOMIC CALENDAR EVENTS FOR OCTOBER 26th

USD Gross Domestic Product Price Index (Q3)
USD Gross Domestic Product Annualized (Q3)
USD Personal Consumption Expenditures Prices (QoQ) (Q3)
USD Core Personal Consumption Expenditures (QoQ) (Q3)
USD Michigan Consumer Sentiment Index
EUR ECB President Draghi’s Speech SPEECH
EUR ECB Cœuré Speech SPEECH

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