The U.S. Dollar is taking a breather from gains as markets remain concerned about the lack of guidance while trying to find anything positive to hold onto.
Overview
During a chaotic time for trade and peace, the United Kingdom has to cope with leadership as Boris Johnson resigned from being Prime Minister after a series of scandals, reprimands, and ultimately loss of confidence by his cabinet. The reaction around the world has been one lacking surprise as the pressures have been mounting for a few months. Meanwhile, equities across the globe picked up a little momentum after China announced plans to further stimulate its economy.
Unfortunately, not all is well in U.S/China relations following a statement from Chinese officials rebuking current White House efforts to curtail sales of technology from European manufacturers to their companies. ASML as well as Nikon have key chipmaking tech that the U.S. wants to prevent from getting to China. The Chinese have concluded this foments “technological terrorism” and “abuse of state power” to coerce. The combination of that and FOMC Minutes signaling no hesitation to keep raising interest rates to fight inflation make for a tough formula to take away any dollar strength. The Employment Situation will be closely monitored tomorrow.
What to Watch Today…
- No major economic events are scheduled for today
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MXN
The Mexican Peso picked up some value following the release of inflationary numbers that suggest Banxico will stay on a monetary tightening path. Commodities lately have been falling in price making a dent on Peso gains from May. Nevertheless, the Peso has a chance to climb after hitting the highest inflationary figures in 21 years.
We also think a bit more long-term that the Peso has geopolitical developments on its side as regionalism takes over globalization post-pandemic in terms of production and this benefits business activity. Furthermore, Colombia, Chile, and Peru now have government leadership in line with AMLO’s line of thinking and this could fare well in unifying Latin-American trade and interests
GBP
Sterling is climbing at the moment following a busy session in the U.K. that concluded with the resignation of Boris Johnson from the head of the government post. After three years of major changes brought on by Brexit and the shock of COVID-19, it was personal misbehavior and political miscalculations that brought down the Johnson regime. As outside observers, we hope the leadership search leads to a more stable U.K., especially as the globe needs cooler heads in coping with a laundry list of problems. Rishi Sunak, the former Chancellor of the Exchequer, is one out of just a few names being thrown out there as potential replacements. Mr. Johnson will be the caretaker in the transition until October
