Daily Market Update

U.S. Dollar stay tight through the week, Pound surges

July 19, 2019

The U.S. Dollar remained range-bound after a week in which trade headaches and higher bets on monetary loosening prevented the greenback from gaining or losing.

Overview

If anything, it moved up by less than 0.4% against its main counterparts, according to the Bloomberg Dollar Spot Index. Odds of a 50-point interest rate cut by the Fed have improved, which caused some negative reaction against the buck yesterday that proved temporary after other items broke news overnight.

Without much change in the dollar’s direction, the next week and a half could provide new intrigue as the European Central Bank meets a day before Gross domestic Product figures come out in the U.S. to gauge the second quarter. We see dollar staying tight until July 31st and doubt that a hike of 50 points will come, but it seems almost guaranteed the Fed will look to lower by 25 points. Once the actual cut occurs it shall spur some movement and it could be dollar negative, but not sure if for very long.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

EUR

The Euro fell after seeing some reprieve yesterday as a result of news out of Italy that the discord between the two main political parties in power may lead to snap elections. Additionally, many economists speculate that the European Central Bank is ready to discuss methods to stimulate the financial environment; however, it may not be rate cuts as there is not much room for it. Overall, just factors that combined prevented the Euro from advancing for the week.

Deputy Prime Minister Matteo Salvini was said to have wanted to propose for snap elections in Italy, but then took this back. Reports in Italy accuse Salvini allies of cooperating with Russians trying to meddle in the European Union Commission Presidential election. The Five-Star Movement and the Northern League are the two parties in alliance governing Italy currently, but domestic infighting over government spending and now potential investigations are causing headlines in Europe to declare the government will collapse and new one be voted in.

GBP

The Pound is climbing out of its hole as the risk associated with a “no-deal” Brexit scenario is fading. A vote in Parliament took place to stop the next Prime Minister from forcing the country out of the European Union without an agreement in hand with the EU to trade. The currency is up by over 1.0% the last few days as data also made the outlook for the country less gloomy.

Conservatives were the ones who surprised with 30 members rebelling and passing the amendment against party leadership orders to stay cohesive. We shall see if the turnaround for Sterling that we have been calling for actually materializes as it looks like the U.K. is feeling pressure to do things that look toward progress on a deal, not just leaving.

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