The U.S. Dollar is gaining ground this morning based on a sour mood over than economy giving mixed signals and fomenting uncertainty.
Overview
U.S. Home Purchase applications came in at the lowest since 1995, a sign that borrowing costs have reached a point of denting the Housing sector in a significant way. Simultaneously, data out of the Eurozone revealed a dire situation in which expansion has gone away and contraction is exceeding expectations.
Globally, there are doubts across all regions, and it seems like negative dynamics are impacting the overall mood. In the past month, stocks have dropped 4.0% per the Dow Jones Industrial Average, Buck meanwhile has gained 3.0% per the Bloomberg Dollar Spot Index.
We will get Purchasing Managers Index figures out at 9:45 AM for August with estimates of expansion in the Composite, while Manufacturing could be on the downside. The Jackson Hole Symposium starts tomorrow, but action on statements will not happen until Friday when Jerome Powell addresses the press.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
EUR ⇓
The Euro fell to its weakest point since mid-June following the sour mood across markets and data providing evidence that there is economic performance divergence marking a major difference in FX values. While some global growth outlooks have recently been upwardly revised, the Eurozone is coping with a slowdown that is affecting future spending decisions for businesses. The HCOB Eurozone composite PMI reading came in with a deeper contraction than was expected.
While the economies of the eurozone have managed to avoid crisis, their situation seems stagnant at the moment. A possible pause in the rate-hike path by the European Central Bank to ease the downward pressures on the economy of the continent is causing the shared currency to dwindle as here are now odds of a cut by the end of the first quarter of next year, standing at 21.0%.
MXN ⇑
The Mexican Peso has remained strong, and it is an exception, along with the Japanese Yen, to the Dollar’s current rally. While exuding central bank hawkishness in refusing to turn dovish as other LATAM central banks decided to start cutting into their record-high interest rates is a big part of its strength, it all comes down to economic success post-pandemic. Incomes have risen in Mexico as a result of sharing economic ties with a U.S. trajectory defying the pessimism in early-year forecasts. We shall see what knocks it down, but even oil price volatility is aiding a country holding reserves and infrastructure.
