The U.S. Dollar is losing ground for the first time this week as its rally hit the brakes overnight following some dovish commentary.
New York Federal Reserve President John Wiliams explained that current monetary policy was in “a good place” and did not require to go towards further tightening. Per his assessment, the hikes have already made enough impact on lowering inflationary growth as well as balancing supply and demand a bit more post-pandemic.
Nevertheless, the Buck’s recent bout of strength as surprised many. According to the Bloomberg Dollar Spot Index, the Buck is due to close out its eight consecutive week of gains. This represents the longest streak for that gauge since 2005. As the economic performance divergence between the U.S. and the globe continues to widen, expect downward pressure on currencies. However, be aware that there is a desire across global markets to get away from that narrative. As oil prices also increase, it makes the need for more dollars to purchase barrels. Volatility remains high though and there are doubts about the sustainability of dollar advancement.
What to Watch Today…
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The Euro is recovering some ground following a rough week of hard data reminders of the gloomy situation that has developed. With national economies stagnant and suffering contractions in some sectors, the Euro-zone has been revealed to be in a struggle of both stubborn inflation, derived also from the negative effects of war on trade, and a disconnect in how to spur growth without counting so much on China.
The relationship between the second largest global economy and the Europeans has soured and made for political calls to deviate from the interdependence that has matured over decades of cooperation. Euro value will benefit greatly if economically somehow things turn around, perhaps from more military expenditures, technology, as well as a desperate push for greener infrastructure. For now, the outlook is not clear and the present worrisome.
The Mexican Peso is the biggest mover this morning as traders speculate that the central bank will maintain its hawkish stance on interest rates for longer than previously thought. Inflationary growth in the form of Consumer Prices revealed a very slight difference in the price growth from a year ago, sticking around 4.64%. Since disinflation carries little momentum, Banxico will likely stay put and keep its high interest rates around, likely not considering a pivot until after the second half of 2024. We have Peso where we predicted it to be, proving to be a bellwether of the inconsistency being experienced in markets.