The U.S. Dollar advanced overnight as geopolitical news is helping the currency thrive as a safe-haven.
North Korea’s (DPRK) Kim Jong Un has suddenly decided to threaten not to have a summit to discuss denuclearization because they disagree with the goal of the event as described by National Security Advisor John Bolton.
Kim Kye Gwan, a disarmament negotiator, pointed out that Bolton said the U.S. would use a “Lybia approach” with the DPRK, which he quickly described as tragic. This is rewarding the greenback, which is now trading at its strongest level in 20 weeks, per the Bloomberg Dollar Spot Index.
We will see if Industrial Production later at 9:45AM shows a greater expansion than the 0.6% expected for April. Housing starts this morning did not have any effect on the FX market, but surely disappointed those monitoring it as there was major contraction, (-3.7%) instead of just (-0.7%) expected. The buck is likely going to remain afloat as other regions experience more uncertainty.
The Euro is trading at its weakest level since Mid-December as problems that have been brewing for a year have finally come to affect the shared currency. Italy, the third largest economy in the EU and home to the European Central Bank’s President Mario Draghi, is starting to show signs of tremendous political struggle that could translate into economic disaster.
The lack of a cohesive government, doubts over a neutral Prime Minister, a growing debt-to-GDP ratio, and no reforms in sight are causing the country’s bonds to slump. The proposal of a debt “writedown” is alarming market watchers and economists. Mr. Draghi himself had to comment on the “political fragmentation” afflicting the continent, which only dragged the Euro down further.
The Pound has returned to its merited levels after falling on concern of no confidence in Prime Minister Theresa May to unify her cabinet. May also proposed putting together a “Brexit Paper” with details on every aspect of her “plan,” prior to a major EU Summit in June. The chances of common-sense solutions in the short-term are slipping, the deadline for Brexit will need to be pushed out, and the economy is starting to really dwindle. Sterling is resilient because it should be lower considering the issues mounting.