The U.S. Dollar is up by over 1.0% for the week after a busy week of trade headlines and economic data that ultimately benefitted the currency as a safe-haven.
Trade issues aside, the economy seems to be on a steady growing path, satisfying the Fed’s desired targets, and maintaining an overall better situation than other regions.
Commodity-based currencies have been crushed this week as fear as well as uncertainty over trade barriers negatively affects their national gross domestic product forecasts. Mexican Peso is the great exception, rising by 6.2% thus far in July after the end of election anxiety.
We have more figures to look forward to next week, but FX will continue to be influenced by speculation over trade negotiations on multiple fronts. NAFTA talks and Brexit talks are scheduled for next week also. The return from a diplomatic trip and a meeting with Russia’s leader Vladimir Putin in Helsinki will also provide reasons for market fluctuations as the dynamics of relations have been rattled.
The Euro fell nearly one full percent after a week of general positive momentum for the dollar as a safe-haven to the news regarding trade barriers and disagreements in the NATO summit. Europe is trying to find cohesion as well as security guarantees, thus the continent stands to lose a lot when relations with the U.S. seems shaky.
Furthermore, the winds of potential appreciation as a result of plans by the European Central Bank to tighten monetary policy have ceased to blow. Recovery for the shared currency will come in the way of stellar data and positive developments in talks with the U.K.
The Pound was one of the biggest losers of the week after a 1.5% decline in value based on the political turmoil that started last Sunday when the Brexit Secretary, David Davis, resigned. Boris Johnson, now a potential candidate to be Prime Minister and Pro-Leave star, also left PM Theresa May as both men felt disappointed with the direction of Brexit strategy.
Additionally, May is being criticized from the outside only adding pressure to the economic outlook, Sterling, and her chances to keep her job. The EU will meet with U.K. officials next week as the Europeans break down their likes and dislikes of the latest white paper. Regarding the paper, it highlights things we all know Britain wants, like more time and adherence to commercial regulations, while leaving doubts over the future of banking and other services.