The U.S. Dollar experienced a bit of backlash to end last week after a devastating Thursday for all of its counterparts across the globe.
Euro fell to its weakest levels since the summer of 2017 along with Swiss Franc and everything else basically fell to its weakest point thus far in 2019. However, the buck’s rally is over even after Retail Sales this morning revealed an unexpected 0.2% expansion for January exceeding an estimate of no movement up or down.
The big exception to current FX flows is the British Pound, which is subject to tremendous volatility this week as it enters a crucial time to determine whether Brexit happens before the March 29th deadline or if something, anything delays it. We are of the belief that last week’s reaction to the European Central Bank meeting marked a big point of for dollar strengthening, but it is clear that doubts globally remain. Maybe now that regions admit their economies could use help, they could be on the way up along with their respective tender. Solutions to the chaotic nature of markets will soften the greenback.
What to Watch Today…
- No major events scheduled for today.
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The Euro is still trying to recuperate from the devastating blow from the ECB’s dovish stance and announcement of Targeted Longer-Term Refinancing Operations, but it is not doing a poor job doing so. After the ominous Thursday losses, the shared currency rebounded despite a (-2.6%) contraction in Factory Orders in Germany.
Mixed data showed Italy and France impressed and on the contrary expanded by 1.5% on average in January. The low Q4 numbers and the worrisome start to the year may mean there is plenty of room for growth, especially in the bloc’s largest economy, Deutschland. We see Euro recovering and eventually seeing gains as dollar strength becomes questionable.
The Pound declined as fears grow that Prime Minister Theresa May will not be able to get her deal accepted. Furthermore, this is crunch time and anxiety is building up because businesses need to know if there will be some delay. There is some belief out there that May can still get Tuesday’s necessary amendments to pass her overall bill.
Wednesday, Parliament votes on whether the country goes with a “no-deal scenario,” and if that vote is rejected, the final vote will be Thursday on whether to give May more time to negotiate. Be ready for a lot of headlines on deal-making amongst members and the negotiating parties.