The U.S. Dollar is trading in tight ranges, having recovered some ground overnight as markets digested downward economic outlooks in the Euro-zone and the U.K.
Although equities worldwide are on the rise and some commodity-based currencies sustained their gains, the Oceanic tender Aussie (AUD) and Kiwi (NZD) are truly resurging after central bankers talked down the prospects of cuts to interest rates. Overall, the greenback’s strength is mostly found against the majors Euro, Pound and Japanese Yen.
Inflationary growth is taking a break in the U.S. as Consumer Price Index figures revealed a contraction for December and 0.0% in January. The lack of momentum is starting to show itself with prices low in the face of trade uncertainty across all industries. President Donald Trump’s willingness to extend the March 1st tariff deadline has uplifted markets and halted the buck from rising too much, but all watchers are hoping solid, concrete resolutions come from talks in Beijing the next few days.
What to Watch Today…
- No major events scheduled for today.
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The Euro is down and economic evidence is surely to blame. A report exposed that the 19-member Euro-bloc is indeed suffering as its Industrial Production is falling at the fastest pace since the financial crisis.
This bad sign will need to be addressed by the central bank and the chances that they would like to intervene in such a frail economic environment could mean long-term stagnation in Euro gains. While we do not expect the currency to plummet, we do fear data needs quite a turnaround for appreciation to happen soon. As ECB official Jens Weidmann said, the euro-zone is still not crisis-proof.
The Pound is headed downward after a speech by Bank of England Governor Mark Carney emphasized the dangers of no deal tied to separation from the European Union and the damages to employment, long-term consumption as talks drag on. Meanwhile, Prime Minister Theresa May is said to be ready to speed up the ratification of an EU post-Brexit deal and is doing her best to gather support from Euro-skeptic Tory members.
We think time is of the essence and Pound may reflect the stress as it swings upwards in the next month if there is indeed a chance May will pass something. As those chances of success fade, Pound will be dragged down until there is an attempt by Parliament to take over the process and perhaps call for a second referendum. The chaotic fluctuation will be on since the deadline for leaving is March 29th.