The U.S. Dollar is closing out the week on a downward trend that would make the weekly movement almost flat overall per the Bloomberg Dollar Spot Index.
Overview
The U.S. Dollar is closing out the week on a downward trend that would make the weekly movement almost flat overall per the Bloomberg Dollar Spot Index. Indeed, as we reach mid-August and the final weeks of summer holidays for many here and across the Atlantic, there is plenty of speculation about the Fed’s willingness to act as well as market enthusiasm over the possibilities of financial alleviation, even if just in the form of a 25-basis point interest cut.
While for some days the Buck experienced a positive correlation with surging record equities, today that momentum has stopped. There is growing concern that companies are going to eventually pass on the increase in costs from tariffs to customers, which could exacerbate inflation and prevent the Fed from being stimulus-driven. Chances for a reduction in September stand at 90.0% now.
The back-and-forth has not started erasing any gains from stock indices, but the rally seen from earlier in the week did come to a halt. There is also talks of the U.S. government taking a stake on the technology company Intel, which has struggled, but it is crucial in the making of advanced microchips that the administration wants to push in production to compete with Taiwan, Japan and China. A summit between President Donald Trump and Russian leader Vladimir Putin is taking place in Alaska which is surely to make impact as statements come out. European equities, and the shared currency, could benefit immensely if there are reports of any progress towards a ceasefire or peace of any kind. Meanwhile domestically, the release of July Retail Sales revealed a slower pace of expansion than expected at 0.5% vs. 0.6%, but the June numbers were upwardly revised. Annual average is at 0.2% from 0.3%.
What to Watch This Week…
- Industrial Production 9:15AM
- University of Michigan Consumer Sentiment 10AM
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The Euro is looking to finish the week with a gain, currently trying to be around 1.0% against the Buck. While Euro-zone figures have not been impressive, the doubts over the stability of the U.S. economy, which is experiencing “stagflation,” have played a role in halting a U.S. Dollar recovery against the shared currency. Next week will serve as a test for Euro-zone steadiness looking at measures for inflation, Purchasing Managers’ Index, and Consumer Confidence. Expect big moves for the pair if the talks between the U.S. and Russia are fruitful and get some deal over Ukraine on the table.
MXN ⇓
The Mexican Peso has been slowly dwindling and could end up losing about a percent of value to the Buck after underwhelming economic indicators this week for both of the North American neighbors. While investment and higher costs are starting to dampen sentiment, the Mexican Peso has been relatively resilient and even Emerging-Market currencies have held steady after losing steam as July came to an end. Per the MSCI Emerging-Market Currency Index, August has meant about a 1.0% rise for the basket representing various economies. We shall see if there is more room for appreciation as China is also talking about stimulating their influential economy.
