The U.S. Dollar is looking better than yesterday following a recovery by its counterparts this week.
News surrounding trade issues continue to cause swings, but it is clear that markets are now getting accustomed to tensions and that the strength other currencies are displaying is based on economic growth merit. While the U.S. economy is solid, the greenback may be bound to experience losses as September closes. Working solutions to pains like Brexit, NAFTA, and even the Italian budget weigh negatively on the buck.
This week has witnessed the dollar weaken by over half a percent as measured by the Bloomberg Dollar Spot Index. We believe that the last quarter of the year could continue to be a time for other currencies to gain some ground, but this will likely be a slow appreciation as the domestic consistency will prevent too many problems for the most traded tender.
The Euro climbed by almost 1.0% throughout the week, primarily based on optimism that could still prove to be overdone. Italy wants to promote growth and their aggressive spending plans threaten to put too much pressure on a tight budget. If Italy also cannot come up with some fiscal plan soon, economists are concerned that stagnation will only worsen and put an already fragile economy on the ropes.
Brexit and Italy are huge tests of EU sustainability and officials looking to integrate the Union more are hoping the solutions to these foment the possibility of creating a more cohesive mechanism to deal with financial weakness for all member nations. If there is success, naturally expect the shared currency to rise and vice versa.
Sterling is up by 2.7% since September 5th after achieving to move beyond the 1.2000s. Historically, the Pound has been one of the quickest currencies to recover from losses and good economic data certainly made that possible this week. Prime Minister Theresa May wants to keep pushing her plan for Brexit, which has conditions that her U.K. “allies” do not want.
Also, she has tried to allude to nations’ leaders at a summit this week instead of focusing her points on EU Chief Negotiator Michel Barnier, who has frustrated her with his proposal to provide Northern Ireland inclusion in EU customs to avoid a hard border with the Republic of Ireland. Statements come in many forms and tones, this deciphering true feelings has been difficult lately, but it is clear that both sides are eager to come up with a deal or no deal soon.