The U.S. Dollar is trading in very favorable ranges following a dovish speech by European Central Bank President Mario Draghi that is trying to sink the Euro as this is being written.
Additionally, weaknesses in other regions like Japan are making dollar-denominated assets more attractive as the obvious discrepancy in economic performance between the U.S. and rest of the globe cannot be ignored. A finalized reading of Q4 Gross Domestic Product is expected to establish that the economy did indeed grow by over 2.0% at 2.3%. It had been downgraded from an original reading of 2.6%, so any strange revisions could impact the greenback if it is downward.
At the moment, equities are flourishing in the midst of a lot of uncertainty still over trade items like the tumultuous Brexit and Chinese tariffs. Nevertheless, the buck is benefiting from the fact that now that the Fed has established that it will not look into hiking interest rates this year, other regions are likely going to have to look into cutting interest rates since the outlook for global growth is deteriorating in the eyes of business leaders as well as investors.
What to Watch Today…
- No major events scheduled for today.
Complete Economic Calendar can be found here.
To illustrate the point brought up earlier, the New Zealand Dollar lost over 1.5% of its value this morning and keeps dropping as traders react to the Reserve Bank of New Zealand’s assessment that cuts to interest rates may come very soon. Current benchmark rate of 1.75% is likely to be cut by 25 basis points at the next meeting in May with odds of that occurring now at 44.0%.
Labor lag, an economy that is struggling to reach quarterly growth of 1.0% (now at 0.6%), and trade concerns over a changing dynamic are all affecting the central bank’s confidence in the nation’s progress. Many developed and developing nations are on this boat.
The Pound is trading steadily ahead of the debate and votes on Brexit alternatives scheduled for today. At the time of writing, the House of Commons started initial comments and motions to get things going. It is exhausting at this point to re-type all the possible scenarios, since remember, the U.K. was supposed to be able to walk on its own starting this Friday.
We have until April 12th for Parliament to decide if an orderly Brexit is happening, somehow, or if they will allow the people to vote on the process. Nothing is clear, except that time is of the essence and if the world is caught without preparations for a clean walk-out, things could start looking disastrous. At the moment, the currency is right in line with our forecasts.