The U.S. Dollar rose overnight following the return of bad news in Europe that dropped both equity markets and the value of the Euro.
It is possible the greenback recovers a bit today after a week that saw it hit the brakes on what was a seven-week winning streak against its counterparts.
We shall see if any statements during the G-7 Summit have any impact as tensions are expected in regards to trade issues. President Donald Trump will not stay the full two days as he is scheduled to leave tomorrow morning in order to prepare for a meeting with North Korea.
Overall, the buck remains strong and near multi-high levels against the majors. Canadian Dollar and Mexican Peso continue to both suffer from anxiety over NAFTA as well as shaky downward commodity markets. In addition to political concerns, the Peso has been affected the most, losing plenty of ground and sinking to its weakest level since February of 2017. We believe more turbulence is ahead next week with central bank action all across the globe, including Federal Reserve and European Central Bank.
The Euro has recovered 1.8% of its value since May 30th after signals from ECB officials that they are ready to let go off intervention in the financial system. Quantitative Easing has been said to end in September, but lately comments have reconfirmed this concept, which had been left out of conversation in recent months of slow and underwhelming economic data.
Speaking of such, Manufacturing as well as Industrial Production contracted instead of expanding as estimated in Germany and France respectively. We foresaw these swings as dollar rallies against the Euro have been typically short-lived even as economic performance divergence is evident. The short-term gain for Euro could experience a low life span as well with the sluggish trend in indicators.
The Canadian Dollar is trading near its worst levels of the year after job figures revealed a loss of 7,500 jobs in the month of May. The unfortunate figure adds to worries over the potential negative effects of no NAFTA clarity, or existence, to an already softer economic situation from years past.
The Bank of Canada was the first to increase rates last year after any central bank other than the Fed, but confidence in our neighbor’s land is fading as oil prices have also dropped. As long as trade uncertainty stays a topic, the “Loonie” could lose further.