The U.S. Dollar is trading in mostly familiar ranges ahead of Minutes from the last Federal Reserve meeting are released later today at 2 PM.
Overview
Markets are trying to figure out how aggressive the Fed will be, and investors are coming to accept that a stronger-than-expected economy will mean a higher terminal interest rate from the Fed down the line. For the next few months, it will be crucial just how fast the Fed moves, and at least for the moment, it looks like markets do not expect too much hawkishness.As far as the stability of global relations, economists are no different from anyone else in fearing escalation from Russia as frustration grows with the duration of the war and its current toll. It is estimated that Putin’s military has lost over 200K men in the year-long battle. Indeed, the world has truly changed with a current reconsideration for re-arranging alliances based on support for one side or the other.While isolating Russia has not been a consensus from all countries, the most important player in China as Russia, is hoping they continue to be an economic partner regardless of what goes on in Ukraine. The buck will certainly be sensitive to finance-driven data but expect fear and uncertainty over the conflict to dictate a market of emotions.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇑
The Euro is currently not a big mover at the money as markets chew on data highlighting the growing economy following strong Purchasing Managers Index figures from yesterday. More importantly, EU leaders are readying themselves for the next stage of the conflict in Ukraine after U.S. President Joe Biden assured Ukraine of his commitment to throwing all kinds of support behind the war effort, seen as an attack on sovereignty.
On the other hand, Russian President Vladimir Putin spoke passionately for hours about his grievances with the West, who he blames for making matters worse while giving a long history of empirical moves against Russia from multiple sides.It is clearer than ever that while the global economy and the more directly impacted EU markets thrive during the chaos, the very real possibility of Russia doing something that produces a Sigma event, a shock so negative to the market that the current course and trend of positivity completely turns around for the worse, is still there. It happened last year when the invasion began, so the question is, how far is Putin willing to go? What is the endgame?
MXN ⇑
The Mexican Peso is up to its strongest level against the buck since April 2018, as our bellwether of global trade balance has improved by 6.0% thus far this year. Banxico, the central bank, has managed to more than just keep up pace with the Federal Reserve as it as hiked rates 14 straight times since Summer of 2021.
With an economy looking to grow on energy demand and better trade post-pandemic, the only thing that can get in the way of a surging Peso is the political climate; thus, we will keep a close eye on AMLO’s handling of his last year before having to face elections.
