The U.S. Dollar is trading in mostly weak ranges as worries continue to build over the potential for an exacerbated slowdown in economic activity with the implementation of tariffs.
Overview
This week began with negativity over trade after the revelation of contractionary Gross Domestic Product figures for the first quarter of the year in the U.S. As faith in market momentum goes away, so is belief in the Buck, which has gotten away from its safe-haven role in times of doubt. Companies are being voiceful about how tariffs will eat into profits, which translates into job losses, poor consumption, and ultimately recession down the line in the minds of traders and investors.
On the other side of the Atlantic, European leadership is looking to establish its stance of countering tariff levies by the U.S. while also looking to completely cut off Russian energy imports. If talks to bring down costs do not work, the EU is planning to add tariffs to about €100.0BN in U.S. imported goods. Equities are certainly feeling the pain and loss of enthusiasm that carried them for about two weeks. The S&P 500’s nine-day winning rally came to an end, its best run in 20 years.
Without any data, all attention will be on headlines prior to tomorrow’s Fed meeting and presser. Policymakers are expected to hold rates while markets wait for the opportunity to question Chairman Jerome Powell. While nothing is expected in terms of cuts tomorrow or in June, odds for a cut to occur at the July 30th meeting stand at 68.0%.
What to Watch This Week…
- FOMC Meeting & Presser 2PM Wednesday
- Bank of England Meeting Thursday
- Monex USA Online is always open
The complete Economic Calendar can be found here.
GBP ⇑
The British Pound is climbing over the Dollar, coming once again near its best levels since September of last year hit just two weeks ago. Although not overwhelmingly great, data in the form of Purchasing Managers Index showed that April was a better month among those surveyed than expected. The S&P Global UK Composite came in with slightly more positive reading than estimated while both Manufacturing and Services improved. On Thursday, the Bank of England is expected to announce a 25-basis points reduction, and all ears will tune for any sign that the measure will be repeated soon or let data dictate future moves as inflation gets monitored.
MXN ⇓
The Mexican Peso’s resilience floundered after being an exception to the Buck’s recovery over other major peers, falling to its weakest point since mid-April. A measure of Gross Fixed Investment for February showed very little action in comparison to what was anticipated, coming in at 0.1% vs. 0.9% estimate. Although Mexico’s President Claudia Sheinbaum has been known to get along with her U.S. counterpart, it was reported that she is refusing a proposal to have U.S. troops crossing the border to combat drug cartels.
