The U.S. Dollar turned things around against some of its major counterparts as fears take a hold of markets over uncertain items such as the Brexit situation, trade conflict, and officially the longest U.S. government shutdown now going into its 25th day.
Asian stock indexes were revived by news of further Chinese stimulus coming up, which is a sign also that the tariffs now are taking a heavy toll on businesses globally. Domestically, our stock indexes seem doubtful and are eager for resolutions. In turn, the buck is safe-haven-gaining once again.
Today will be eventful as we monitor debate in the U.K. Parliament prior to the key vote on an unpopular deal at 2PM, but before that we will hear European Central Bank Mario Draghi’s speech to the EU parliament at 10AM as well as Minnesota Fed official Neel Kashkari’s statements at 11:30AM. He is currently on the side of slowing down Fed monetary policy tightening as well as maintaining an accommodative environment, thus potential for what could be interpreted as greenback-negative talk.
What to Watch Today…
- ECB’s Mario Draghi Annual Report 10AM
- Fed’s Kashkari talks in MN 11:30AM
The complete economic calendar can be found here.
Sterling is likely to move wildly closer to the hour of the Brexit vote in Parliament, which will be held at 2PM EST. There are plenty of possible scenarios that could see the currency fluctuate from one extreme to the other, with most traders predicting that the vote will fail and shooting for Pound depreciation. We think that indeed this will be the initial reaction, but Pound could gain rapidly in the next few days if a call for a second referendum, reversal of Brexit process, or new elections are made.
Many in the market have priced-in this as a positive development that would merit Pound gaining some value. Additionally, if May’s deal loses by less than a hundred votes or few, there’s a chance she could make more of a bipartisan deal, which could signal at least an orderly Brexit and bring political peace to the country. We will only have true guidance once the vote is done.
The Mexican Peso is trading around its strongest levels over the greenback since October 18th following news of tighter monetary policy as Banxico, the central bank, indicated they will be buying less foreign bonds. By maintaining focus on local debt, the MXN is expected to circulate at a lower volume in the open global markets.
Furthermore, the Peso has proven resilient to emerging market woes concerned with China’s trade slowdown while also enjoying a break on the oil-price front that has bloomed lately. We see Peso maintaining some of its advancement, but progress has to be made regarding infrastructure, particularly the new airport project that is slowly going.