Daily Market Update

U.S. Dollar Takes a Breather as Indicators Boost Fortunes

April 17, 2018

The U.S. Dollar is trading in tight ranges, but it has managed to stop its recent bleeding.

USD

In recent weeks, the buck has averaged a loss of half a percent overall against its ten main counterparts and is finally stalling any further losses as market watchers’ fears of a “trade war” have started to fade. Additionally, numbers out of Europe and the U.K. have signaled a bit of a break in economic expansion while data out of the U.S. has been mixed.

Housing Starts and Building Permits are delivered a reprieve for the dollar as they revealed a recovery from contractions in February. Building Permits expanded by 2.5% although the estimate was 0.0%. We shall see if month-over-month Industrial Production can meet its low estimate of 0.3% expansion at 9:15AM.

It is important to note that NAFTA news have also improved as outlook on resolution is optimistic. Subsequently, the Canadian Dollar is trading at its strongest level since mid-February while the Mexican Peso is at its highest point since end of September against the greenback. A surge in commodity prices has also helped our neighbors gain round.

 

EUR

The shared currency is up 3.5% thus far this year, increasing in value despite concerns that the economic recovery has peaked and that the accommodative financial environment the European Central Bank has fostered cannot afford to be messed with. The ECB is indeed expected to put an end to all quantitative easing at the end of September, but we shall hear first if there is any hesitation at the next policy meeting on April 26th.

Political battles in the Italian parliament as well as anti-establishment sentiment growing in other member nations could spell trouble for the EU and could pressure the Euro down the line. We shall see if stability quietly unravels if no government can be settled in the euro-zone’s third largest economy. The national debt represents 130.0% of Italy’s Goss Domestic Product, second only to Greece.

 

JPY

The historical safe-haven Yen has been on the decline for weeks, down by almost 3.0% since March 22nd. The causes are clear: the wild upward swings in markets resulting from risk-appetite and worrying developments in a potential exit for Prime Minister Shinzo Abe. The globally well-respected leader is now being accused of several cronyism scandals at home involving multiple associates.

Abe has denied his involvement in any wrong-doing, but polls in Japan already signal at public backlash. He will be visiting President Donald Trump to revise economic terms in relations to China, the Korea situation, and other matters that revolve around a tighter relationship. Both leaders are likely hoping for other distractions to go away.

 

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