The U.S. Dollar is currently down to its weakest point in two weeks as markets digest news over the weekend that included a credit downgrade for America by Moody’s Ratings.
Overview
The negative effects have been felt already with S&P 500 contracts down by 1.0%, ending a streak of five sessions of consecutive gains. Overall, the view on the American economy being a beacon of stability in comparison to others is diminishing. Economists worry that tax-cuts will be introduced but unfunded while partnerships as well as trade pacts are restructured.
Fitch Ratings as well as S&P Global Ratings already had graded U.S. credit below the desired top triple-A position. Treasury yields are rising while the Buck is unable to avoid a weakening trend all around. Gold prices have gone up 1.2%, benefiting as the safe-haven asset to go to in turbulent times. Some analysts believe the impact of lowered ratings can be temporary so we shall see how we navigate through it. Without a ton of data this week, we will be very headline-driven. Thursday we will see Purchasing Managers Index figures from May. G-7 economies and their finance ministers will meet in Canada and surely their statements will make a dent. Fed members will also have commentary throughout the week as they hold a meeting in Florida on Tuesday.
What to Watch This Week…
- G7 meets all week
- PMIs all around on Thursday
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The Euro is once again being propelled by a souring mood over the Buck and any American asset following the weekend’s credit downgrade on the U.S. Additionally, inflation for the Euro-zone came out as expected, staying at an annual average of 2.2% while only advancing by 0.6% in April. The shared currency could have momentum now and be in line for a great performance for the week as a EU and U.K. leaders meet in London for a summit focusing on defense spending and cooperation post-Brexit. In the face of many challenges, the U.K. is warming up to being closely tied to EU goals at large. PMIs will be out on Thursday to see if good date reinforces the Euro run.
MXN ⇑
The Mexican Peso is mildly improved over the Buck as the U.S. faces some judging by Moody’s Ratings. Banxico, the central bank, decided to make a 50 basis-point cut to its benchmark interest rate but this only managed to calm down Peso strengthening very temporarily. Perhaps the economy is performing, and we will be able to judge that with Retail Sales out on Wednesday, Gross Domestic Product reading for Q1 as well as inflation in the form of Consumer Price Index on Thursday.
