Daily Market Update

U.S. Dollar Down, Weak Against all Counterparts

January 24, 2018

The U.S. Dollar is down all across the board, losing ground in the face of political gridlock and doubts over the new trade tariffs proposed by the administration.

USD

Some experts, including U.S. Treasury Secretary Steven Mnuchin, feel that the greenback’s decline is a good development in order to reduce the current-account deficit. The cheaper dollar makes it possible for exports to increase. Thus far in 2018, the currency has fallen 3.3%, its weakest performance overall in over three years.

Purchasing Managers Index figures will be out at 9:45AM with an expected expansion reading of 55.0 and 54.3 for manufacturing PMI and services PMI respectively. Any disappointment in data points is sure to sink the dollar further as other factors such as doubts over U.S. trade and diplomacy have been discussed at the World Economic Forum in Davos, Switzerland. German Chancellor Angela Merkel spoke very strongly against perceived protectionism. The uncertainty over trade policy and tariffs is damaging to the buck’s strength.

 

EUR

The Euro found more evidence behind its strength after PMI figures beat expectations out of Germany, France, and the Euro-bloc. Markit Eurozone Composite was forecast to expand at 57.9, but exceeded at 58.6. Any reading above 50 signals expansion, so this is certainly good news and may make it difficult for the European Central Bank not to maintain a very positive stance.

However, the Euro strengthening may have limits in the eyes of officials and their tone could be one trying to hit the brakes on appreciation. As of now, it is clear that the shared currency will not face many challenges, except for some political distractions that may come up in Italy and Germany.

 

GBP

The Pound improved to its highest level since June 22nd, 2016 following news of good unemployment and wage figures. Average Weekly Earnings grew by the expected 2.5% and unemployment remained at 4.3%. Additionally, Brexit seems to be considered workable and there is less negativity than optimism attached to it. This marks the sixth week straight of Sterling gains.

 

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