The U.S. Dollar is trading at its strongest level overall in over two weeks, per the Bloomberg Dollar Spot Index, as markets awaits a solution to the U.S. government shutdown, which has entered its seventh day.
Overview
Potential talks between the White House and Congress’s Democrats are reported as various mixed statements have been given by both sides about willingness to get something done and avoid a prolonged stand-off. Meanwhile, equities have been muted, the Buck is trending higher against major peers, and Gold reached $4,000.00 for the first time before retreating. The safe-haven precious metal is now forecast to reach as high as $4,900.00 by December of next year, according to Goldman Sachs’ notes to clients.
Investors and traders are looking for alternatives to U.S. stocks with fear that the stalemate in the U.S. government and trouble in the Euro-zone’s second largest economy, France, are going to cause a correction for global equities. Bitcoin is also rising in popularity along with gold as a “debasement trade.” With official government data unreleased, it makes for a blurry future as businesses try planning ahead.
What to Watch This Week…
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EUR ⇓
The Euro is dropping in value as the political situation in France keeps markets on edge. President Emmanuel Macron was encouraging Sebastien Lecornu not to quit his post as Prime Minister and to give negotiations with parties in parliament another chance. Europe’s Stoxx 600 as well as the CAC 40 Index domestically started climbing in hopes that there may be a turnaround in the friction amongst lawmakers. Having the largest deficit in the Euro-zone is making for headaches in coming up with a budget that will necessitate major cuts along with tax increases.
JPY ⇓
The Japanese Yen has reached its weakest levels to the Buck since February as the globe continues to react to the new Prime Minister and her plans. Sanae Takaichi is looking to expand on the concept of “Abenomics,” the idea of expanding spending that was championed by former Prime Minister Shinzo Abe. The new PM seems to be guided by supply-side economic theory in which taxes and interest rates shall be reduced to encourage more borrowing, more investment from firms. As such, it looks unlikely the Bank of Japan will be increasing interest rates anytime soon which is affecting long-term projections of a stronger Yen as had been forecast.
