The U.S. Dollar is trading in weaker ranges following a week of some tumultuous moves based on labor data in the U.S. suggesting a cooldown in the economy may be ahead.
Overview
More importantly, markets seem at ease with the prospect of no more interest hikes from the Fed, whose officials are coping with stubborn inflation. Indeed, prices up and some indicators pointing at some weakening make it also possible to start talking about “stagflation” down the line. Either way, the dollar’s momentum has been halted after an April that saw it take away even the few performers, such as Mexican Peso, who had been exceptions by appreciating in Q1.
This week will not be characterized by critical data as it was last week, but we will get officials throwing commentary throughout the week that will move the needle. It is important to note the rally across U.S. treasuries and how statements may affect it along with FX. Japan and UK markets are closed, while China has come back after being off for a holiday the last few days. Geopolitically, there could be surprises as global leaders for ways to ease tensions in the Middle East after some failed attempts but renewed efforts to get to the table.
What to Watch Today…
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JPY ⇓
The Japanese Yen remains away from historically low values following the intervention in FX markets to alleviate the downward spiral the currency has been on all year. Although the Bank of Japan hiked to get away from negative interest-rates, it seems BOJ officials are not convinced the economy is ready to increase borrowing costs further. This lack of a path to hikes and rates is making it hard for investors to keep the faith in Yen prospects for improvement and causing a headache for those wondering if more interventions are needed.
EUR ⇑
The Euro has been on a tear recently, appreciating based on U.S.-related concerns, but also on better numbers out of the Ancient Continent. After some recessionary pressures, the main economies of the Euro-zone are back to growth with hopes ahead that looser monetary policy will only make the gains across the larger economy much bigger. The shared currency is now on its fourth consecutive day, its best streak in 2 months. We will need to wait until next week to get more figures to potentially solidify the rally.
