Daily Market Update

U.S. Dollar hits new highs as the month closes

September 27, 2019

The U.S. Dollar rose by 0.8% overall this week according to the Bloomberg Dollar Spot Index but could face a bit of pullback if this morning’s slight weakening trend continues.

Overview

An established safe-haven, the buck has been resilient and stubborn to negative-impact factors such as the likelihood of further interest rate cuts or the optimistic tone regarding talks with China over trade.

Although these developments should have propelled a negative dollar rally, such an event did not materialize in the face of deeper slowdowns in the Euro-zone as well as Asia and South America. Commodity-based economies elsewhere like Africa and Australia have also needed to exercise easing measures to maintain an accommodative environment.

The consistency of the U.S. economy also cannot be ignored, with indicators such as today’s Personal Income and Durable Goods Orders that met and exceeded their expectations respectively. Indeed, Durable Goods were supposed to show a (-1.1%) contraction yet rose to the occasion with August figures showing an uptick of 0.2%. Personal Spending did not impress with a lower than expected reading at 0.1% instead of 0.3% and lower revision to the month prior.  Our weakened greenback outlook has not quite panned out, but the fourth quarter could lead to global recovery if there are fewer signs of recessionary pressures based on trade concerns and fiscal spending mounts an economic comeback.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

EUR

The Euro collapsed to its worst level against the buck since May 2nd, 2017 as German woes and political uncertainty have taken away confidence from the bloc. Economic, Business Climate, Industrial, Services, and Consumer confidence surveys for the Euro-zone all showed a worsening picture. As a whole, the population feels squeezed by the lack of spending and government gridlock keeping budgets with austerity as a priority.

German financial heads have been upset at their loss of influence in matters of monetary policy and latest show of this coming with the resignation of Sabine Lautenschläger, Germany’s representative on the Executive Board of the ECB who is tired of arguing against the current loosening stance. With discord, expect Europe’s chances for expansion to be compromised. Much is needed ahead of a return to Euro gains, but trade could be key as a recovery in global demand could turn the shared currency a bit with German exports hopefully increasing.  

MXN

The Mexican Peso fell by 1.2% this week and is at its weakest point against the dollar since the start of the September based on the central bank’s decision to cut interest rates from 8.0% to 7.5%. Banxico is exercising loosening policy, cutting the world’s second-largest interest rate behind Argentina, as their outlook for economic growth has been plagued by a lack of progress in trade especially by the perpetual wait for the implementation of the USMCA trade accord.

Oil price flows also have not been helpful since Saudi Arabia and OPEC seem content with a return to high productivity since the attack on the facilities that at first threatened a shortage as well as higher barrel prices. We foresaw these ranges and believe they could stay until there is some news of legislative bodies in Canada, Mexico, and the U.S. all accepting and putting the new NAFTA to work.

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