The U.S. Dollar is trading in weaker ranges to close out a relatively tight week for FX flows in comparison to the wild rally in equities.
Overview
Much of what has kept the dollar down has been due to enthusiasm behind Nvidia and its high stock valuation, now approaching $2.0 trillion. It is clear that Artificial Intelligence is propelling the chipmaking industry, which in turn can be a flood for business activity in other areas and across the globe.
Ironically enough, oil prices are down as a result of investor concern that demand for it is weakening. Guess the world is being fueled primarily by tech. Iron ore was close to its biggest weekly drop in a year. There is growing concern about concentration risk, as only a handful of companies are driving the gains.
Outside of equity exchanges, Federal Reserve officials addressed market bets over upcoming dovish policy. While they echoed the sentiment that data needs to provide further proof of ongoing disinflation to act and actually cut, their conclusion seemed to land on asking, “What’s the rush?”
This week showed that global performance economically is stagnant in comparison to the U.S., but there are some signs of recuperation with some Purchasing Managers Index in Europe finally leading to a little expansion. Meanwhile, the U.S. is in wait-and-see mode, which frustrates risk-takers, but now they have found their reason to revive their appetite in Nvidia and focus on other items that will once again come into play and foment volatility. The Buck is down over half a percent for the week and back to where it started for the month of February. Not much left of the leap-year month, which seemed to cruise by.
What to Watch Today…
EUR ⇑
The Euro is moving around its strongest point since the month began after improving this week based on decent data numbers pointing at recovery. It was good to see France and Germany come up with figures demonstrating some growth, especially as PMIs finally climbed and producers had some confidence. We keep pushing the concept that we may have witnessed the worst out of Europe as far as stagnation. Stocks are not everything, but solid that the Euro Stoxx 600 managed to reach a record. We will get inflationary as well as confidence gauges next week to see if there is consistency in the positivity.
GBP ⇑
Pound Sterling climbed by half a percent for the week, along with a few other currencies, such as the Antipodean ones in AUD and NZD. The risk-taking took value away from the Buck as not only did companies in the West improve, but China came back from celebrating the new year with a determination to stimulate its markets. Tech enthusiasm will also affect how other Emerging Markets take steps toward further modernization, with India presenting a threat to China’s hold on manufacturing at a large scale. This week marked a crucial moment for global markets, and we will see plenty more questions and speculation over the impact of AI and how it perhaps recharges global trade in a different way and through other nations.
