Not with a bang but with a whimper, the United States Dollar is on flat ground this morning after both last night’s presidential debate and today’s PCE data failed to move the needle in any concrete direction.
Overview
It appeared USD had a small amount of bid energy in the overnight session, after a lackluster debate generally, but any such movement has dissipated this morning as both the monthly and annualized PCE figures came in on expectations and at their slowest pace of inflation in quite some time.
Ironically, while the last week of Q2 brought with it an oversaturated data calendar and renewed election anxiety in the US, the Dollar all week failed to respond in any major way to any of these events, and the Bloomberg Dollar Spot Index is set to close the week, at the time of writing, less than a tenth of a percent away from its opening position on Monday morning. Quarter-end rebalancing flows have dominated FX markets this week, and price action has remained fairly quiet. The PCE release this morning was the ‘big thing’ that markets were holding their breath for, and a flat reading of inflation for the month of May was not only priced in by traders some time ago but is also very much in line with what the Federal Reserve is looking for on inflation trends. Oddsmakers are still fairly split between betting on one and two interest rate cuts from the Fed this year, and data releases this week have failed to shift those expectations materially. Risk-averse trading around the world is keeping the Buck buoyed but not necessarily lending it extra strength at this point.
This weekend and the last day of the second quarter brings with it the first round of French parliamentary elections, which could add volatility back into an otherwise sluggish G10 market.
What to Watch Today…
- Monex USA Online is always open.
EUR ⇓
The single currency is trading with a slight touch of weakness against the Dollar this morning ahead of the first round of voting in France’s parliamentary snap election over the weekend. Polling released this morning showed incumbent president Emmanuel Macron’s approval rating fell to its lowest level in three months, dropping six points to 36%. Further polling projects that Marine Le Pen’s National Rally group will receive 36.2% of Sunday’s vote and Macron’s centrist coalition will likely come in a fairly distant third place. Eurozone CPI is also due out this coming week, likely to show that headline inflation ticked slightly lower toward the ECB’s target of 2%.
MXN ⇑
Though G10 volatility has remained low this week, emerging market currencies have had a bumpier ride as risk sentiment globally has been on a roller coaster, and MXN is no exception. MXN popped substantially weaker in overnight trading during the US presidential debate but has recovered much ground today and is now trading stronger against the USD than at yesterday’s close. As the US’s largest trading partner, ahead of China, MXN is particularly sensitive to developments in the US political scene, and what many have deemed a poor performance by incumbent President Biden added some volatility to the USDMXN pair.
