The U.S. Dollar is trading in weaker ranges to close out a week characterized by central bank action and introducing new volatility for the American economy as the government faces a possible shutdown.
Overview
There is concern surrounding the continuity of the U.S. government paying its obligations as congress is struggling to pass a temporary funding plan.
On the macroeconomic front, data released earlier showed the Personal Consumption Expenditures came in slightly lower than anticipated for November while Personal Income and Spending also slowed down in pace. Later at 10AM, we will get the December University of Michigan Consumer Sentiment, which has been on the rise since July. The mood in markets and amongst consumers is simply mixed while the Buck overall remains around its highest in 2 years per the Bloomberg Dollar Spot Index.
Next week markets will be limited by low volume as Christmas Day arrives on Wednesday. Monex USA will be closed on that day in observance of the holiday.
What to Watch This Week…
- Monex USA Online is always open
JPY ⇑
The Japanese Yen is looking to recover after rising over half a percent overnight following a week in which it fell to its weakest point since July. Much of what troubled the Yen had to do with speculation that the Bank of Japan may not be willing to raise interest rates again anytime soon. Nevertheless, the fundamentals of the economy remain stable as inflation has strengthened and climbed to its highest level in three months. This gives the Bank of Japan room to hike more even if they rather pursue a wait-and-see approach.
A world of tariffs on China could also bring on higher prices down the line and at least the BOJ is looking to address it by increasing interest rates that are very low. JPY thus has room to appreciate as well. While Yen had a poor weekly performance, Finance Minister Katsunobu Kato warned in an interview Friday about too much currency speculation and how they are willing to intervene to calm markets if need be.
MXN ⇑
The Mexican Peso is trading in stronger ranges after a bit of downfall plagued it in the week following the Fed’s hawkish cut and some worries about the future of trade. Following the Fed’s vibes, Mexico’s central bank, Banxico, lowered interest rates by 25 basis points to 10.0%. The consensus on the reduction, which exuded prudence, and no promises to do gradual moves, but rather be cautious made this event a bit of a “hawkish cut.” Additionally, data out of Mexico is making any lower borrowing costs a welcome development while the economy is experiencing the opposite of dire straits.
