The U.S. Dollar has already experienced a busy and mixed morning, initially falling as news of the European Central Bank rate hike sank it, but U.S. indicators’ surprises and a dovish ECB presser have caused a comeback swing.
Overview
Data out of the U.S. revealed an excellent economic situation better than all estimates. Q2 Gross Domestic Product advanced by 2.4% vs. 1.8% expected, Durable Goods Orders for June increased by 4.7% over just 1.3% forecast, and Personal Consumption also impressed, going up 1.6% over 1.2%. Additionally, there was evidence of disinflation in the second quarter as Core Personal Consumption Expenditures increased at a slower pace than anticipated, at 3.8% instead of 4.0%.
As the trading session has progressed, it has become clear that there is not as much central bank policy divergence as there is a difference in the economic realities of both sides of the Atlantic. The hemisphere we are in is not facing head-on the challenges that come with long-term armed conflict, shut-off pipelines, and food export issues. For now, the dollar is rallying, and it is merited.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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MXN ⇑
The Mexican Peso has reached a spanking new fresh high against the dollar, its strongest value since November 2015. As the U.S. economy only grows closer to the Mexican one because of “near-shoring,” the central banks of both nations can exercise more flexibility in their thinking and implementation. Additionally, June Unemployment for the country dropped to 2.65% when 3.0% was estimated. Labor is strong, the economy stable, Peso is the only gainer over the buck right now as all across the board sink significantly.
EUR ⇓
The Euro did not sustain a rally after the ECB announced its 25-bps hike since economic data simultaneously showed the U.S. to be expanding more than foreseen. At the moment of typing, ECB President Christine Lagarde ended her press conference and made the event a “dovish hike” as she described a deterioration in the economic situation based on downward pressures and concerns over the long-term negative effects of Ukrainian inability to export grain as needed for European demand. It is clear that manufacturing has taken a toll while services are performing well enough to believe no major collapse is ahead. Euro is paying the toll of a blurrier vision for its future as the remainder of the year tests all aspects of the activity.
