The U.S. Dollar is seeing downward movement against most currencies as equity and commodity markets rose globally despite the implementation of trade tariffs.
The conflict in free trade seems to have been mostly shrugged off, although Europe and China have both claimed concern and commitment to retaliation. For the most part, markets are not rewarding the buck after a mixed bag of data lately that was highlighted by the negative outcome in wage growth per Friday’s Average Hourly Earnings. Slow income growth means less consumption.
Today we will see no numbers, but wait for headlines as the world reacts to a summit between European powers this past weekend where barriers to trade were discussed. Additionally, world affairs may continue to surprise and create some reaction as U.S. State Secretary Mike Pompeo just came back from a trip to North Korea that has been reported to have multiple interpretations. More importantly, the conclusion is that disarmament will not be easy to achieve.
The Euro continues its recent revival based on increasing bets that then European Central Bank is finally ready to start tightening monetary policy via cutting bond purchases and increasing interest rates. A summit over the weekend sought European unison in confronting tariffs suggested and planned by the Trump administration.
The economy of the continent had lost some steam the first two quarters and the euro saw punishment from political instability in the formation of an Italian government. At the moment, it seems like the greenback is due to lose some ground to the shared currency, which we believe is reasonable.
The Pound saw a rise over the weekend in the midst of what should be political turmoil for Prime Minister Theresa May. Brexit Secretary David Davis will be focusing on England in the World Cup semis after resigning on Sunday citing complete disagreement with May’s “soft” Brexit vision
The plan that was agreed upon Friday that would include functioning within EU regulatory measures when it comes to food and other key items for years to come was snubbed by the hardliner Conservative Tories who saw it as a betrayal of the Leave campaign. It looks as if market watchers are on the side of May and Sterling is appreciating because a “soft” Brexit is received as better news than an abrupt abandonment of all that ties U.K. with EU. A new Secretary has already been hired: Dominic Raab.