Daily Market Update

U.S. Dollar Woes Continue after Partial Govt. Shutdown

January 23, 2018

The U.S. Dollar is trading in choppy ranges, mostly down against the Japanese Yen and relatively stronger against the Mexican Peso.

USD

Yesterday’s passing of a temporary funding bill until Feb. 8th helped ease some concerns as market participants returned to risk-appetite. The greenback has been negatively impacted by the gridlock politically and the decision to add tariffs to solar panels and washing machines.

In fact, the tariffs are as severe as 30.0% on panels and 50.0% on washing machines. This move by the administration represents a nightmare for pro-trade business leaders who fear the penalty can be devastating to commerce. More importantly, this ties with mounting issues with NAFTA talks and the potential for the U.S. to abandon it. Thus the Mexican Peso is feeling the anxiety and weakened by one percent since yesterday.

 

JPY

The Japanese Yen improved by over half a percent this morning, primarily benefitting from a consistent narrative from the Bank of Japan at their meeting. We learned that officials are satisfied with the current pace of economic growth and credit their current monetary policy for establishing the recovery.

Although it sounded dovish, BOJ Governor Haruhiko Kuroda explained that the bank is in no position to consider exiting its policy, but this did not dent the currency. Furthermore, it seems like there is inflationary growth as Consumer Price Index is on an upward trend. This could bode well for the Yen long-term.

 

GBP

Sterling is down slightly after reaching its highest level since before the Brexit referendum yesterday. Pound long bets have increased since the start of the year as traders believe both the EU and U.K. will work out a trade deal.

Recent overtures from leaders in Spain and the Netherlands along with forward-thinking commentary from France’s Emmanuel Macron have convinced many that the EU stance will be one where a no-deal scenario will not be acceptable. Regardless of economic under-performance and concerns over companies fleeing, the Pound remains gain-bound for now.

 

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