The U.S. Dollar is trading in mostly familiar ranges with a surprise jump for the Euro following the European Central Bank’s decision.
Overview
Although an interest-rate cut was expected, an upgrade to inflationary expectations into next year in the initial statement has boosted the shared currency. At the time of writing, ECB President Christine Lagarde was preparing to begin her press conference. All other pairs remained mostly flat ahead of tomorrow’s U.S. Non-Farm Payrolls and the Employment Situation.
With a day mostly of anticipation for what is to be an important batch of indicators tomorrow, flows will likely be dictated by any surprises in other markets. On the other side of the pond, besides exercising monetary policy tools, ceremonies for the observation of the 80th anniversary of D-Day will take place with President Joe Biden present in France. In addition to data here, Friday will also feature European Gross Domestic Product numbers as well as some gauges of Chinese trade.
What to Watch Today…
- U.S. Employment Situation Friday
- Monex USA Online is always open.
EUR ⇑
The Euro is trading in slightly favorable ranges just as ECB’s Lagarde starts her press conference. Live-monitoring the first reactions by some key financial figures, they perceived the initial ECB announcement as “hawkish” with inflationary expectations for 2025 upgraded from 2.0% to 2.2% forecast. More importantly, the ECB promises it will keep policy restrictive to achieve its inflationary rate target of 2.0%. Thus, it is likely this cut will not be followed by another one right away.
Additionally, improved economic points have shown that there is not enough sluggishness to set a path for more than two rate cuts for 2024. In her first remarks, Lagarde noted how the economy has indeed improved per recent figures. Overall, similar to the central banks of Mexico and Canada, this may turn out to be a “hawkish cut” that reduces borrowing costs but looks to a future with growth behind that sustains the respective currencies’ values against the Buck.
MXN ⇓
The Mexican Peso improved yesterday, recovering a chunk of the losses it faced the first two days after the elections. The result, Claudia Sheinbaum and a supermajority for her political party, Morena, seemed to scare economists and investors worried that policies and regulations would come without checks and balances. To counter the negativity, Mexico’s first female President has expressed a willingness to work towards unity and the carry-trade that has made MXN appealing because of its high interest rates is back on across exchanges. There is also growing doubt that there will be a congressional consensus that could lead to drastic reforms.
