The U.S. Dollar is rallying this morning against all peers as inflationary pressures remain strong in an economy that seems too hot to handle.
Overview
As we begin the session, equities look to be lower while swap traders are adding bets guaranteeing the Fed hikes in their next three meetings for March, May, and June. The PCE Deflator for January increased by 0.6% vs. the 0.5% expected, while the year-on-year average climbed to 4.7% vs. the 4.3% estimated. Personal Income was unimpressive at 0.6% instead of the 1.0% forecast, but Spending climbed 1.8%, exceeding the 1.4% expectation.This week marked one year of the Russian invasion of Ukraine, sparking a polarizing conflict that is changing the established order for decades after the Cold War. More importantly, it is a worrisome prospect that Russia could escalate with deadlier force as frustration grows with the land operation.The U.S. Dollar and America have benefitted from a globe in chaos from all sorts of troubles, and it will be hard to break away from that mode even as markets look to move beyond the trade and commercial hardships that war may represent. A lot of uncertainty remains, but the Fed is expected to keep fighting the boogeyman that is inflation.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇓
The Euro fell to its weakest point in about seven weeks following disappointment from Germany with a deeper contraction to the economy last quarter than it was expected. As far as Germany is concerned, they are facing stronger recessionary pressures than economists anticipated, which speaks volumes about the slowdown the war has fomented across Europe.
There is no doubt our outlook for the shared currency remains rosy, but we must admit that the road forward may be tougher for important economies such as Germany’s than we originally hoped. February proved that the start-of-year rally over the buck could not be sustained.
MXN ⇓
The Mexican Peso has fallen slightly to the buck, unlike the rest of the tender sinking as bets increase on a hawkish Fed for the entire year. Gross Domestic Product in Q4 expanded more than expected by 3.6% vs. a 3.5% estimate. In comparison to other typical advanced economies such as Germany, Mexico is still having upward growth.
As the conflict in Ukraine goes on and allegiances are realigned based on choosing sides, Mexico stands to benefit from being geographically close to the U.S. and can be used as an alternative to China for manufacturing if relations there only sour further.
