The U.S. Dollar continued its upward momentum, hoping to close out the week about one percent stronger than where it started.
Overview
In anticipation of the Fed’s action next week, markets seem to be focused on the global situation and whether recessionary pressures will not spare other regions. Mexican Peso continues to have its moment as a beneficiary of the “Nearshoring” taking place as a result of tumultuous relations with China for years.
As far as China is concerned, the government realizes it needs to do more to spur growth and revive faith in its ability to sustain trade demands from all over the world. In the armed conflict, Ukraine is said to be working on a new grain-export deal, which alleviates some of the worries to be had over the weaponization of the food trade. Today’s markets might provide very little in terms of FX guidance while all participants await what the Fed and European Central Bank will make decisions and give official assessments by the end of July.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
The Euro dropped in value this week, falling after having reached its strongest level since the first quarter of 2022. While the European Central Bank is also expected to hike its benchmark interest rate, traders are wondering just how much longer the ECB can continue on a hiking path without denting the Euro-zone’s economy. While each nation copes with idiosyncratic problems, the overall assessment may turn out without consensus, which could bode poorly for bets of further rate increments to come for the year.
Energy costs have come down some, but there is still uncertainty over climate change affecting demand for more fuel to cool down the hottest of summers and what could turn out to be a tough winter. Something to keep in mind that may play out to be a bigger factor long-term towards growth will be the actual commitment to spend on military expansion and defense capabilities.
JPY ⇓
The Japanese Yen is only getting weaker as the morning progresses, following word from Bank of Japan officials that they see no need to deviate from current measures to maintain an accommodative financial environment. Indeed, in complete opposition to the trend in most of the world to tighten and hike interest rates, the BOJ is expected to keep defending its yield curve controls while refusing to get away from negative interest-rate territory. A very slow Asia in recovery from the woes of COVID has convinced financial authorities to play it safe in their eyes and not add to costs during a period of prolonged slowness.
