Daily Market Update

U.S. Dollar experiences a pullback as data worsens

October 03, 2019

The U.S. Dollar is trading slightly weaker ranges as poor data from the U.S. maintained the greenback subdued and a decline in bond yields suggests that the Fed is only getting ready to cut interest rates down the line.

Overview

Besides Fed speculation, everything in markets is a drag with downside risks weighing on investment as there is a growing concern with contraction across multiple indicators and various regions, particularly manufacturing.

We shall see if anything turns positive because trade barriers are once again on the news as the U.S. is ready to place a new 25.0% increase to tariffs on food items and alcohol from Europe. This is all part of the punishment from a World Trade Organization court decision against subsidies given to Airbus that compromised fair competition.

Markit Purchasing Managers Indices, Services and Composite, will be out at 9:45 AM followed by the pertinent Factory Orders as well as Durable Goods Orders at 10 AM. All of these are expected to expand, but weaker readings will further hurt market activity and perhaps leave FX in these familiar ranges.

 

What to Watch Today…

  • Markit Services and Composite Index 9:45 AM
  • Factory Orders 10 AM
  • Durable Goods Orders 10 AM

Complete Economic Calendar can be found here.

 

MXN

The Mexican Peso is down to its weakest level since the start of September, dropping in value as a result of a more loosened stance by Banxico officials and the sluggish commodity market, including oil prices that are on the decline. Emerging markets seemed to be back on the rise in September as the trade front seemed to improve with friendlier approaches in the U.S.-China trade war.

Nevertheless, we are back in a deep sense of uncertainty and politics elsewhere have not helped. Government administrations throughout the hemisphere are facing scrutiny if not mired in scandal as has been the case in South America’s largest players in Brasil and Argentina. Meanwhile, Europe has countries having to go back to the polls often as no alliances form to run the government, which means less concise budgets. Overall, there is a need for spending both fiscal and private as financial markets wonder where the growth will come from next or if we are headed towards recession.

GBP

The Pound is climbing rapidly this morning as reports sounded optimistic regarding the new U.K. trade deal sent to European Union negotiators for review and approval. While there were mentions of agreeable changes, overall it seems like it contains items that the EU will not find doable such as customs checks on the island of Ireland.

Whatever the outcome with the EU, Parliament must find a way to pass it and with the deadline approaching, it’s likely more members will push for a delay rather than take this deal. Naturally, Sterling shall rise as a result of the no-deal scenario fading from the horizon.

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