Daily Market Update

Euro on 4-Day Winning Streak

June 07, 2018

The U.S. Dollar is down primarily as a result of fears surrounding the trade conflicts brewing with retaliatory tariffs.

USD

This week, the U.S. has gone back and forth with the world’s largest economies over imposing tariffs on metals and other products, which has caused ongoing criticism and countermeasures. Mexico, Canada, the European Union and of course, China, are laying on the table their counter-offers to the U.S. position.

Furthermore, commentary in Europe from officials regarding the prospects for economic growth were more positive than expected, which propelled the Euro to its highest level since mid-May. We see the buck on a downward trend until middle of next week when the Federal Reserve will meet in order to decide whether an interest rate hike is appropriate at the moment. Chances stand at 82.0%.

 

EUR

The Euro climbed for a fourth day straight based on optimism from European Central Bank members during speeches yesterday. Chief Economist Peter Praet made statements about how crucial next week’s ECB meeting would be because of plans to officially discuss the end of the bank’s bond buying program, quantitative easing that’s gone on for years since the crisis. Inflation seems to be satisfying enough to consider that the economy may progress without intervention. Governing Council member Jens Weidmann also jumped on the hawkish train by alluding to the “plausibility” of cutting and ending QE by end of September.

Nevertheless, Gross Domestic Product figures met the 0.4% quarterly growth expectation and Factory Orders as well as Retail Sales contracted instead of expanding in Germany and Italy. The mood is against the greenback at the moment, but if ECB President Mario Draghi is mostly questioned about the slowdown and political stability of his home country, Euro may lose its temporary lust next few weeks.

 

GBP

Pound Sterling improved to its best level in over three weeks, once more representing its historic ability to recover quickly. The current anti-trade mood globally has hurt Pound recently as the uncertainty over leaving the European Union has threatened the British economy as evidenced by the sad 0.1% uptick in Q1.

However, the U.S.’s new take on negotiating deals is finally influencing investors’ perspective on what an economy can be re-shaped as if everyone starts charging more for basic products as well as raw materials. Drama remains as now Brexit Secretary David Davis challenges Prime Minister Theresa May’s plans to stay in the customs union in order to allow an open border between Ireland and Northern Ireland. PM May is quickly running out of leverage on anything even with her own cabinet.

 

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