The U.S. Dollar is trading in mostly familiar ranges while weakening against the Euro following some “hawkish” comments emanating from the European Central Bank’s press conference.
Overview
ECB President Christine Lagarde explained right off the bat as her presser started that the period of disinflation in the euro-zone had come to an end and now there would be monitoring of prices going higher as pressures are building for both firms as well as consumers. Here in the U.S., we are also seeing some stubborn inflation after Consumer Price Index figures from August showed higher monthly advancement than estimated at 0.4% vs. 0.3%, bringing up the annual average from 2.7% to 2.9%. Perhaps some costs from producers have been slowly creeping into higher costs of consumption.
No matter what, it looks like the Federal Reserve will be comfortable with cutting interest rates by 25 basis points sooner rather than later and some bets have emerged about officials lowering the benchmark by as much as 75 basis points for the remainder of the year. With poor labor figures, it makes sense to focus on the “stag” part of “stagflation.” Tomorrow’s Consumer Sentiment from the University of Michigan may add to the conclusion that stimulus may be needed to boost the financial environment and confidence that it will be supported. Thus far in the week, the Buck is down overall by half a percent per the Bloomberg Dollar Spot Index.
What to Watch This Week…
- University of Michigan Consumer Sentiment Friday 10AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The Euro is rising as the ECB President Christine Lagarde makes her statements and they seem to suggest there will be little room to cut interest rates for what remains of 2025. The focus on the other side of the Atlantic is inflation, which will be released in the form of CPI next Wednesday, same day as Fed decision taking place. While the economy is not hot, she explained that officials now see growth risks as more balanced. We shall see if the shared currency remains in climbing mode or if its gains will be limited as Lagarde seems to be ending the round of questions with a little less confidence. When referring to being a monetary policy “dove” or “hawk,” she claimed to be “an owl.”
MXN ⇑
The Mexican Peso is the one currency whose advancement is being the most limited out of all major peers after data revealing struggles in productivity. July’s Industrial Production for the month contracted dramatically more than expected by (-1.2%) vs. the (-0.2%) estimate while the month prior was downwardly revised. Additionally, the Mexican government announced the introduction of new tariffs on Asian imports, with levies on Chinese cars as high as 50.0% and other products from the Pacific Rim. President Claudia Sheibaum is using a similar tactic as the U.S. to discourage offshore manufacturing while forcing more revenue rom an increase in commercial trade with the world’s second largest economy. Mexico seems determined to cooperate and coordinate with most U.S.-led policies.
