The U.S. Dollar is trading in stronger ranges to end a tumultuous week in which markets are digesting economic evidence that makes it unlikely the Federal Reserve will be “dovish” for the rest of the year.
Overview
After a reaction to statements from Fed Chairman Jerome Powell that gave some relief to markets hoping for several interest-rate cuts in 2024, the U.S. Dollar is up once again in a dominant way following a more-than-stable Employment Situation.
While Average Hourly Earnings kept up with the expected pace, Non-Farm Payrolls in March increased by 303K instead of the forecast 214K. Expansion in labor and wages is not exactly the atmosphere screaming for loose monetary policy. Job growth for March had the fastest advancement in a year.
Meanwhile, the rest of the globe is coping with slow and inconsistent improvements while more directly being hurt by the geopolitical struggles cutting at the heart of trade. A more expensive dollar, more expensive commodities, and raw materials make for altered investments, delays, and struggles for everyone else. The MSCI World Index measuring financial well-being dropped almost half a percent while American equities enjoyed another week of gains. It will be difficult to find a reason to knock off the Buck as data presents a clear contrast with other major and Emerging economies.
What to Watch Today…
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EUR ⇓
After bouncing back from its lowest point since mid-February, the Euro is once again losing ground as the economic statistics clearly put the U.S. ahead of all other regions. Although the Purchasing Managers Index came in with some surprising confidence for growth in the survey, today’s release of February retail sales revealed a bigger loss in that sector than expected, with a (-0.5%) downward movement for that month.
Unfortunately, there is no consistency in the good vibes from the Euro-zone, and a decoupling from China has made it difficult to count on all that came in during a pre-pandemic globalized world. While we see the potential for growth and some recent victories in the Union, the shared currency will be threatened further as chances for the European Central Bank to cut into interest rates by June stand at 90.0%. The Fed’s stand at 50.0% roughly.
MXN ⇑
The Mexican Peso is the great outlier as the only currency appreciating against the Buck. As all other tender averages a loss of half a percent or more, the Peso is currently rallying and reaching a fresh new zenith since 2015. The “super Peso” has been fueled by some indicators such as a slight improvement in Consumer Confidence, but we feel it may have to do with the Mexican economy’s ability to remain growing while other regions outside North America face woes.
While June elections and other items could present some headwinds, Mexico has defied expectations of slowing down just as the U.S. has. With the two nations working closer together, it is important to see how their trading partnership is not afflicted by the energy as well as agricultural troubles that have emanated from an escalation in armed conflicts. Banxico, like the Fed, can afford to wait and see before cutting more into borrowing costs themselves.
