The U.S. Dollar is trading in favorable ranges as this week starts with mostly dark clouds hovering over concerned global markets.
Overview
China’s issues continue to dampen any positive progress as the debt of a real estate developer that could lead many citizens to face big financial losses and a developing energy crisis remain protagonists of negative headlines. Additionally, the big regulatory hammer coming down on tech and cryptocurrencies comes at a time when central banks, particularly the Fed, seem ready to start tightening up a bit on the eased financial conditions. The recipe is there for the buck to be a safe haven today.
These last days of September will be busy ones as we get a lot of central bank statements to look forward to from forums and committee hearings, starting tomorrow with Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen participating in a Senate Banking Hearing about the “CARES Act.” On Thursday, we just had elections in Germany over the weekend and prepare for more key character name changes as Japan’s ruling party votes on a leader Wednesday. The House Financial Services Committee will do an assessment on the pandemic response on Thursday featuring more Yellen and Powell power duo questions.
What to Watch Today…
- No major economic events scheduled for today
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EUR ⇓
The Euro dipped to its lowest value since August 19th as worries around the world weigh on the Euro-zone, a place where central bankers feel nothing should be changed about close intervention in a fragile environment. The world’s recovery from the pandemic has been slowed down by the Delta variant, a factor that the ECB is taking into account as they delay any serious tightening to their ultra-loose monetary policy that even included an added emergency quantitative easing program.
Unlike other authorities, the ECB wants to exercise a wait-and-see approach to accommodate for any difficulties the economy may encounter as it aims to recover at a faster pace. Issues revolving around the higher costs of energy and travel between nations will add to an already dovish central bank aiming to wait longer than other countries to taper. Without much clarity about the leadership at the moment, we will monitor if a coalition indeed builds to have a stable government following a very tight race between Socialist Democrats and Merkel’s Christian Democratic Union with a small advantage for the former.
GBP ⇓
The pound is quiet, but there are serious developments going on in the U.K. as the energy crisis has forced unprecedented measures. Recent days have seen the publication of awful news for the British in handling a shortage of natural gas while also coping with oil prices making trade ever more challenging for firms that barely came out OK following the worst of COVID shutdowns.
As a result, the government decided to suspend all competition rules in the fuel sector. We shall see how the U.K. navigates some serious uncertainty and active hits to the economy in the form of energy.
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