The U.S. Dollar strengthened this morning following the global equity selloff that started Friday and continued into earlier trading sessions. Prices of shares were affected along with commodities weakening after reports of higher oil inventory expectations in the next year. Markets are on risk-aversion mode as investors are worried that accommodative conditions will come to an end.
Traders are now concerned over central banks wanting to reduce their role in fueling injections of capital and willing to tighten monetary policy after years of trying to boost economic growth. The Bloomberg Dollar Spot Index has improved by over half a percent since Friday.
Comments from Federal Reserve officials Lael Brainard and Dennis Lockhart will be weighed by market observers to gauge how positive of a momentum is building for the Fed to hike rates before the end of the year. The flight to safety in global markets and hawkish Fed outlooks may continue to appreciate the greenback as the week goes on.
The Euro is now trading 1.0% weaker from its monthly high against USD after last week’s European Central Bank meeting left many wondering if the central bank is running out of ideas to support economic resurgence. Throughout 2016, the common currency rose as a result of its carry-trade value as a low-yielding and safe asset in the midst of early global market chaos.
Currently, political divisions building in major and medium sized economies of the Union are causing uncertainty over growth prospects and the very existence of the economic agreements that glue the continent are hanging in the balance. We see the “buck” with opportunity to earn on these deficiencies if the pessimism remains.
The Peso is trading within two tenths of a percent away from its worst level against the dollar on record. MXN hit an all-time low on June 27th. The severe decline is due to revised forecasts by OPEC on the level of crude oil inventories to be produced in the future. Last week, optimism hit the oil markets as OPEC predicted that the harsh winter to come would boost demand and relieve plenty of current supply stock, but this flipped over the weekend and petrocurrencies are headed downward fast.