Daily Market Update

Buck halts its appreciation, inflation steady 

January 26, 2024

The U.S. Dollar is trading in less favorable ranges this morning as the mood across markets is fueled by hopes of financial accommodation for 2024.

Overview

This month thus far has proved that the American economy is strong and that companies are doing well, but there is also a growing sense of global recuperation, especially after commitments from Chinese officials to support and stimulate the economy further.

And it is not just in the U.S. where revenues and earnings are surprising, thus a revived risk appetite. While the Dow Jones has seen a 1.0% climb, the Euro Stoxx 50 has climbed by 2.5% thus far in January. Meanwhile, Emerging Markets have tumbled a bit, down 3.5% from the end of 2023, which has fueled the Buck to a 1.8% rise throughout the month overall, per the Bloomberg Dollar Spot Index.

As far as data is concerned, the release of Personal Spending and Income both came in positive, with the former rising 0.7% over the 0.5% estimate. Meanwhile, the favored inflation gauge by the Fed in the form of the Personal Consumption Expenditures Deflator came in just as expected, demonstrating that prices are steady. This will likely not affect much the chances of a Fed move to cut, if anything, it shows that loose action may not be needed until later than it is thought by markets. At the time of writing, the numbers stopped the momentum for other currencies over the greenback.

What to Watch Today…

EUR  ⇑

The Euro is up, but just ever so slightly to start trying to mount a recovery after falling to its weakest point in six weeks against the dollar. An eventful week was characterized by growing doubts about the European chances for economic flourishing, with European Central Bank officials exuding major doubts about growth. Indeed, there is a growing feeling that the ECB will need to step in with an accommodative policy much earlier than the Fed. We get crucial Gross Domestic Product figures on Tuesday, which are already expected to reveal a (-0.1%) for the quarter. The Ancient continent has survived recessionary pressures but expects a very strong negative reaction if the real statistics show an even deeper decline.

MXN ⇑

The Mexican Peso continued its resurgence, defying losses early in the week and reducing its overall January fall to the buck to just 1.0%. Tuesday will also be important for determining Mexican growth as GDP numbers come out. It is worth keeping in mind that the economy has been relatively strong, with 1.1% registered for Q3, so any indication of floundering could prove to be a major downer for MXN.

As far as the global growth narrative is concerned, good figures will help feed into the story that Mexico benefits from dual prosperity, a stimulus-driven improvement for China, and unstoppable “No-Landing” economic progress in the United States. There will be anxiety mid-year when elections come, but for now, growth will be the key factor in MXN swings one way or the other.

 

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