Daily Market Update

Weakening Euro, Rising Pound, Steady Dollar

January 25, 2019

The U.S. Dollar maintained its quiet trend as markets continue to wait for solutions to trade and the U.S. government shutdown.

Overview

The mood indeed feels a bit sour and uncertain with the impasse affecting economic activity and the release of official statistical data. Today’s Durable Goods and Home Sales are both postponed as most items that had been recently scheduled. We are mostly following the flow of markets and headlines, which carry enough influence, but have clearly kept FX fluctuations rather moderate.

We think that as long as this uncertainty remains, the greenback will stay buoyant because of economic performance simply being superior to that of other regions. While Purchasing Managers Indexes are contracting in major Euro-zone economies like France, American figures have outpaced expectations with some consistency instead. Safe-haven has been thrown around repeatedly and plenty, but that is where the buck stands at the moment as we fly a bit blind with no data to form a conclusive narrative.

 

What to Watch Today…

  • Data postponed

The complete economic calendar can be found here.

 

EUR

The Euro has fallen by 1.5% in the course of two weeks, but it pushed for a recovery overnight after having fallen to its weakest levels since November. Doubts over trade and fiscal expenditures have taken a toll on the Euro-zone economy that has revealed weakening and even contraction in some specific areas of concern like German and French Manufacturing, in addition to Services in other countries.

The slowdown has been finally accepted by European Central Bank President Mario Draghi at his Annual Report to EU parliament lawmakers. Additionally, German Business Confidence registered at its most pessimistic in three years. While the present picture seems a bit dire, plenty of issue items are working towards being resolved, and an eventual boost in global activity and optimism will uplift Euro gradually as the year progresses.

GBP

The Pound is trading at its strongest level in about eleven weeks following positive Brexit news for the country and Prime Minister Theresa May’s hope of a good legacy. Private meetings were said to be held between the administration and Democratic Unionist Party officials who reportedly agreed to back May’s Brexit plans moving forward.

Their support will be key, not so much in attempting to pass a Plan B deal, but rather to smoothen any votes towards a desirable delay and extension of Article 50. Leaving has proven to be very hard, but seeing the gears of the U.K. moving towards a scenario that does not include the complete absence of a trade agreement is advancing Sterling. Momentum could drop at any time, but for now Pound wants to prove its historic resilience and fast reaction to beneficial developments.

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