Daily Market Update

U.S. Dollar swings as data shows shutdown damage

March 01, 2019

The U.S. Dollar rose by almost 1.0% in February, a short month that witnessed the greenback initially rise in the first two weeks, but lose ground ever since because of a return to hope across global markets that many trade issues at hand are being resolved.

Overview

China trade talks have produced mixed reviews, but it appears that sources close to U.S. Trade Representative Robert Lighthizer are reporting progress in establishing a framework of new terms of trade. Finalization of this fix to an already prolonged trade impasse could indeed keep affecting the dollar in a negative way against its counterparts, major as well as developing/emerging.

Personal Income and Personal Spending released earlier this morning, showed an unexpected contraction of (-0.1%) for the former and of (-0.5%) for the latter. It seems like the tight ranges of the past few days will remain with volatility in FX flows quite low with multiple items still uncertain. Downward economic data is revealing that indeed the partial government shutdown was problematic and if a trend develops, the buck could lose some ground based on lack of economic merit.

 

What to Watch Today…

  • ISM Manufacturing Index 10AM

Complete Economic Calendar can be found here.

 

EUR

The Euro has improved by over half of a percent during the past two weeks, defying some of the pessimism that characterized the Euro’s fortunes at the start of the year. While doubts remain over Italy’s ability to have a stronger GDP that does not contract and whether the European Central Bank can stay away from aiding the financial system, recent push for better productivity is starting to change momentum.

Additionally, Inflationary figures came in at 1.5% exceeding the estimated 1.0% for February and PMI Manufacturing expanded slightly more than expected. We see Euro recovering if Germany’s figures get back to meeting forecasts and if the labor-union talks in France improve.

JPY

The Japanese Yen is on a major slide at the moment after discussions within the Bank of Japan that seem to be geared towards monetary policy loosening to spur the anemic economic environment. BOJ Governor Haruhiko Kuroda mused about the possibility of a major stimulus package while other officials hinted at the need to get away from a strong Yen when the economy needs to start expanding at a faster pace. There is room for the currency to lose for the rest of the year if indeed these are not just thoughts, but plans of action.

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