The U.S. Dollar is trading at its strongest levels overall since end of July following a long weekend for banking that was characterized by renewed friction between the world’s two largest economies
Overview
China is certainly putting pressure on the U.S. after a Friday announcement that there would 100.0% tariffs on Chinese imports.
Friday closed with a market sellout in equities as the news caused an immediate negative reaction following what had been an achievement in getting Israel to agree to a ceasefire in Gaza after years of armed conflict and devastation. The call to levy more costs to trade only fuels doubts about the progress the global economy can attain if the U.S. and China continue this endless back-and-forth. In the latest obstacle to trade, China sanctioned parts of a South Korean shipping tycoon in order to retaliate and affect usually easy commerce with the Pacific Rim.
We are still blind on data points as the U.S. government shutdown continues. Later today, we will hear discussion about monetary policy from officials, including Chairman Jerome Powell when they gather at the National Association for Business Economics around lunchtime. There are inflationary gauges and labor measures due later in the week, we shall see what the word is on producing those.
What to Watch This Week…
- Euro-zone CPI, Friday
- US Nonfarm Payrolls, Friday 8:30AM
- Compliance Webinar – October 23rd @ 4pm EST – Save your seat
- Monex USA Online is always open
EUR ⇓
The Euro is hovering near its lowest point since August and is on a big losing streak in the past month with a drop of 2.6% in value within four weeks. France’s delicate situation has caused a downward spiral for the shared currency. There were reports over the weekend that Emmanuel Macron will be able to survive and keep his government. There was fear last week the only solution was going to be a call for snap elections. While budget and taxes will certainly need to be worked on quickly to appease traders and investors, the Euro-zone needs a boost from economic indicators to revive its currency. August Industrial Production is set to be released tomorrow with an expectation of contraction (-1.6%) so a surprise in the positive could change Euro fortunes. September Consumer Price Index figures will be out Friday with an annual average at 2.2% for now.
MXN ⇓
The Mexican Peso is down by over half a percent this morning and now fallen to a fresh weakest level against the Buck since the first week of September. With the U.S. and China fighting, eventually the attention to shipping troubles will impact Mexico, which has become a bridge between Asia and out hemisphere, especially after the pandemic. Because of how tightly trade flows between Mexico and the U.S., the issues to commerce can bode poorly on MXN as well. While the Buck functions temporarily as a safe-haven asset, we shall see if Peso rapidly improves the moment good news arrives over a resolution or delay in tariffs.
