The U.S. Dollar fell to its weakest level overall in two weeks, per the Bloomberg Dollar Spot Index, following commentary from President Trump regarding tariffs yesterday afternoon.
His take on the benefits of tariffs changed for a moment when he tweeted that it would be good to not have barriers to trade with Europe, however he doubts any tariffs would be removed from their end. Meanwhile, market watchers are eager to see what comes out of today’s meeting with European Commission President Jean-Claude Juncker who specifically comes to prevent a trade war and more threats of tariffs.
There is only data in the form of Home Sales up for release later at 10AM. It should be noted that the return of NAFTA talks has improved our neighbors’ currencies with Canadian Dollar and Mexican Peso up by over half a percent on the positive news. Mexican trade officials are hoping to establish a revamped deal by December in order to prevent much influence from newly elected President Andres M. Lopez Obrador who takes full power in December.
The “Loonie” has surged by 1.4% in the past few days, erasing all its losses from the first half of July. Monetary policy tightening after the July 11th Bank of Canada’s hike to the main interest rate by 25 basis points certainly can be credited, but also the relative strengthening of oil prices and hopes for return to economic growth in the second half of the year are to thank.
With NAFTA negotiations once again on the table, there is optimism over trade starting to make a turnaround, however, Canadian Prime Minister Justin Trudeau has warned that the tariffs proposed in the name of national security by the U.S. are a separate issue to handle. We do foresee the Canadian Dollar appreciating as the year progresses, but slowly.
The Pound Sterling jumped 1.5% in the past six days, countering the negativity that poor economic indicators have brought upon the currency. Prime Theresa May finally can claim some sort of victory as the departure of David Davis from the Brexit Secretary role has allowed her to demote the department in charge of talks and strategy. She will take full control and seek no more consultation since Boris Johnson also left a vacuum of potential criticism in the Foreign Ministry.
The thinking behind the Pound’s upward momentum is that May will successfully work out a deal of her own making that is backed by a majority in Parliament and also supports business interests. While the Bank of England and the economy may not seem ready to raise rates, chances still remain above 90.0% for a hike in August. GBP could indeed see some gains right now.