The U.S. Dollar picked up momentum against some counterparts, particularly British Pound, Norwegian Krone, and Mexican Peso for a variety of reasons.
The pound is certainly weakening as Brexit negotiation news keep getting more negative, while Krone and Peso are overcoming doubts in oil markets and their regional stability. Mexico had gained from being a safe-haven Latin-American asset but is now falling victim to doubt on overall trade.
On the other hand, the buck fell against the safe-haven Yen, Thai Bhat, and South African Rand. JPY climbing because of downward spiraling stock indexes is not a new development, but since assets such as gold are starting to recover in price, places that produce and hold gold like South Africa and Thailand are seeing their currencies rise. A mixed dollar might mean more volatility and less boring weeks in FX flows moving forward.
What to Watch Today…
- No major events scheduled for today.
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The Mexican Peso has fluctuated within a 1.5% range thus far in May, attributing the wild swings to benefits from rising oil markets, the consequences of turmoil in South America, and domestic economic resilience. While many emerging markets are suffering from symptoms similar to the Great Recession, particularly seeing real estate sales go down by double-digit percentages, Mexico’s property sector is stable.
Additionally, construction is recovering and home prices rose last year. We agree with current levels, but see room for losses if oil prices start stagnating and if economic indicators start looking shaky. The situation in Venezuela can play as an aid for appreciation since conflict and chaos in other Latin countries solidifies Mexico’s image as a safer place for foreign investment and asset holding.
Sterling is falling as a result of more confusion and no achievements on the Brexit front. Indeed, Prime Minister Theresa May discussed having an earlier deadline for Brexit that would satisfy Conservatives, scheduled for August 1st. This would make things more convoluted as parliamentary elections would likely occur and strategically many in Labour would oppose it since it could be advantageous to the Tories.
Altogether, this is only getting messier because Labour thinks May’s customs plan is ridiculous and many politicians are set on pushing for elections of some kind whether it’d be new ones for Parliamentary members or on the Brexit question. The pound is sure to be volatile next few weeks as both major parties look to settle differences.