The U.S. Dollar jumped over the weekend to its best level overall since January 23rd as the U.S. and Israel engaged in armed conflict with Iran.
Indeed, strikes on Tehran and the rest of the Persian nation resulted in the killing of longtime leader Ayatollah Khomeini, rattling the traditional power structure in the country, but not yet knocking down the Islamic government. While this continues and reports are taken with a grain of salt from across social media, investors and traders are naturally taking positions towards safety, thus holding on to the U.S. Dollar while oil prices continue to surge after shipping traffic over the Strait of Hormuz was compromised.
This battle may go on longer than many anticipate with intelligence experts warning that Iran can put a long fight as they have a large volume of drones for attack while also being able to strike Israeli territory. Military bases across the region are on edge with hotels and infrastructure taking damage in typically untouched places by havoc such as Dubai and Bahrain. The escalation of it all will keep everyone scratching their heads, while some outlets report willingness after the big strikes from all parties to renegotiate. Expect the turmoil to overshadow a deluge of data this week ranging from Prices paid by suppliers to Retail Sales and ultimately Non-Farm Payrolls on Friday.
What to Watch This Week…
- Euro-zone Q4 GDP, Friday
- US Nonfarm Payrolls, Friday 8:30AM
- Monex USA Online is always open
EUR ⇓
The Euro has dropped along with other G-10 peers to the Buck as the global situation gets complicated following the decision by the U.S. to use military power. As Iran and its allies could counter the actions, there is worry that a very long period of conflict is upon us and could deteriorate economic progress all around. Longer-term, it could translate into a refugee crisis for the Ancient Continent. There will be economic indicators that could support the shared currency while all markets worry. Tomorrow, the focus will be inflation on Consumers Price Index, followed by Purchasing Managers Indices on Wednesday, Retail Sales on Thursday, and the last reading of Q4 Gross Domestic Product to close out the week.
MXN ⇓
The Mexican Peso, falling along like everything else, is down to its weakest value since start of February. Although most currency pairs are over 1.0% down, a month-low against the Buck, you are seeing resilience in the Emerging-Markets Currency realm, with the MSCI Emerging Market Currency Index not dropping too far from its all-time record high. As the conflict develops, we expect volatility to remain elevated and for the unexpected to have a chance. There is sentiment across market classes this feels a bit like the early 2000s.
