The U.S. Dollar remains quite strong following the release of Gross Domestic Product for Q4 with a finalized reading coming in less than the expected 2.3% pace of growth at 2.2%, certainly below the original 2.6% reading and thus signaling that things have slowed down economically.
Regardless, the g-10 and others are getting crushed as other central banks around the world have established an even more dovish stance than the Fed when it comes to monetary policy moving forward. The pessimistic outlook is only fueling buck strength.
Trade talks with China will take place in Beijing the next few days as the main U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin try establishing dominance again. Lately, hopes for a deal on better trade terms have gone awry with the U.S. asking European nations not to allow Huawei to build its 5G internet project. Also, there are concerns over diplomatic differences over the expansion of Chinese surveillance of the South China seas, the biggest trade routes usually controlled by the U.S. Navy. A world of anemic activity and potential conflict do aid the greenback so at the moment there is little resistance to its rise.
What to Watch Today…
- Pending Home Sales Index 10AM
Complete Economic Calendar can be found here.
The Euro is trading at its weakest level since March 8th when the ECB announced that it would seek to help banks in September with some refinancing operations. The recent slump in economic data, the worries over Italian and French government stability and Germany’s contractions in production have painted a picture of a stagnant Europe that could be headed towards recession.
Our Q1 predictions for Euro certainly did not materialize as we figured the continent had room to grow, and it still does, but the issue is that sectors are falling into negative territory and with no plans from ECB to tighten policy, no one is feeling the shared currency deserves to be held. However, any type of recovery that can be mounted and possible changes to the ECB line-up of experts looking to change policy are still scenarios that can lift Euro second half of the year if not sooner.
The Pound swung down this time by almost half a percent as the U.K. is coping with a political crisis. Tomorrow, history was set to mark it as a day of separation between Britain and the European Union, but the lack of cohesion in finding a deal suitable enough to meet the needs of all parties has led to a Parliament without direction and a Prime Minister’s offer to resign being blatantly ignored.
Brexit has revealed the true colors of Britain, a broken as well as lost nation in its politics, government and diplomacy. Since Parliament yesterday could not agree on where to take this whole process, now anything is possible, even May calling for new elections. April 12th is the deadline and we are no closer to having clarity on how this will end. A referendum to the people is starting to only look more desirable as time goes.