Daily Market Update

Dollar Takes Minor Hit as GDP Hits 4.1% in Q2

July 27, 2018

The U.S. Dollar weakened up slightly after Gross Domestic Product figures that came just below expectation.

USD

Quarter-on-quarter GDP grew at 4.1% in Q2 right under the forecasted 4.2%. On a good note, last GDP figures for Q1 noted an upwardly revised 2.2% over 2.0% originally. Surprisingly, the Personal Consumption level improved at a pace of 4.0% when 3.0% was estimated. Per the Bloomberg Dollar Spot Index, the greenback stands at the same level where it started off this week.

We have University of Michigan Consumer Sentiment survey left at 10AM. In the midst of trade tensions, geopolitical headlines, and doubts over the long-term economic growth, the buck remains a strong performer. Additionally, the divergence in activity and productivity continue to weigh on main counterparts Euro and British Pound. These ranges may be the new normal for the next month or so.

 

EUR

The Euro stayed in familiar ranges following GDP releases domestically and across the Atlantic. French quarterly GDP came in at only 0.2% instead of 0.3%, thus bringing the annual pace to a lower average of 1.7% from 1.9%. We think this will prevent the Euro from establishing any momentum to close the week mostly unchanged. Prices for the shared currency are just about where they were during the summer of 2017.

 

MXN

The Mexican Peso is trading 2.9% stronger thus far this week, returning to its strongest levels since the end of April. The positivity behind a return to the negotiating table on NAFTA terms is a welcome bit of news for the Peso and its economic outlook. President Donald Trump says he reached out to newly elected leader Andres M. Lopez Obrador (AMLO) in order to foment a good relationship.

Per our analysis and conversations with traders in the country, we sense that a lot of the fear surrounding AMLO has faded amongst local economists as well as business leaders. Politically, he is very popular and will have a friendly alliance in government to support him once he sits in December. We think there will still be volatility surrounding the Peso towards the end of the year that could lead to depreciation. Swings and twists are not a shocker with this currency.

 

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