The U.S. Dollar is trading in weak ranges across the board, cooling off the Buck and erasing gains from previous sessions.
Overview
Markets are trying to accommodate to more threats of tariffs to come and are starting to view their potential for causing a major supply shock to the U.S. economy that could jeopardize economic growth as well as risk further inflation.
The Dollar had been rising on the idea that the economy could withstand the changes to trade, but there are worries about long-term sustainability. Meanwhile, global markets are getting a reprieve, particularly in Europe where good earnings for Mercedez-Benz and Airbus uplifted stocks and overshadowed disappointment over the lack of European participation in the diplomatic attempts at bringing the Russia-Ukraine war to a ceasefire. Gold prices reached a new record high as the beloved precious metal serves as a form of safe-haven asset amid so much uncertainty.
Jobless Claims out at the time of writing revealed higher numbers than expected at 219K vs. 215K. Thus far, the average appreciation for currency pairs against the Buck is less than half a percent with Japanese Yen playing a big exception and improving by over 1.0%. We will get Purchasing Managers Indices from various regions as well as domestically tomorrow.
What to Watch This Week…
- U.S. and Euro-zone PMIS on Friday
- Monex USA Online is always open
Complete Economic Calendar can be found here.
JPY ⇑
The Japanese Yen has reached its highest value since December as speculation grows that the Bank of Japan will be ready to increase interest rates again. The BOJ’s next meeting will not be until March 19th, but odds of “hawkish” action taking place in their next two meetings have gone up to now 30.0%. The pressure of tariffs and inflation are making officials more comfortable with the idea of tightening the financial environment and that is playing a positive tune for a currency that is also popular as a reserve.
MXN ⇑
The Mexican Peso is surprisingly up to start the day regardless of statements from Banxico about future monetary policy and the possible implementation of tariffs on key large industries. Banxico officials decided to cut interest rates by 50 basis points at their February 6th meeting and Governor Victoria Rodriguez said those slashes to borrowing costs can continue. Their main interest rate remains high at 9.5% with plenty of room for reductions. Nevertheless, MXN is climbing as are most EM currencies against the Buck.
