The U.S. Dollar continues its winning streak as a strong economy continued with added payrolls impressing and hawkish commentary from Fed Chairman Jerome Powell.
Globally, yields on treasury bonds went up as bond purchases slumped big time.
Signs of less intervention from central banks and higher interest rate prospects are credited for the downturn, which in turn boosted the buck as a safe-haven. Some analysts are already saying the equity markets may be next as the age of “easy money” truly comes to an end, thus risk-aversion is forecast.
We will see the release of Factory Orders and Durable Goods Orders at 10AM, which could indeed further help the buck. Trouble elsewhere will remain a driver of dollar advancement and we figure the dollar will be a big winner by the end of the week. Political distractions today may keep economic and market news on the down low.
The Euro is suffering from added fears to the Italian situation. Attempts by Prime Minister Giuseppe Conte to calm the tension did not work as he promised that Italy would significantly reduce its budget deficit starting in 2020, but not next year as the EU has implored. The bond rout also can be credited to the potential for economic calamity in Italy does not fix its spending woes. The national debt represents around 120.0% of the country’s Gross Domestic Product. Euro may not catch breaks unless a surprise resolution occurs or markets ignore the fiscal struggles.
The Japanese Yen is trading around its weakest level in about ten months primarily as a result of complications in trade, recent natural disasters, and market realization that the Bank of Japan will remain accommodative. The Yen is valued during times of global uncertainty and had climbed back in August, but solutions to trade issues and record equity markets depreciated it by 2.3% in September.
Japan’s economy tends to be consistent and a trade surplus maintains it a reliable one to invest in, however, an aging population, few births, and trade dynamics changes are casting doubt over its ability to keep with others’ growth levels. We can see how a correction in markets could boost the Yen next year, but short-term we see a lot of volatility.