The U.S. Dollar strengthened today against Euro and others as markets digest data and central bank discussion
Overview
This increase was driven by a solid Retail Sales report, which bolstered optimism that the Federal Reserve will be able to achieve a “soft landing”. Equities climbed in early New York trading, underscoring strong consumer demand that continues to power the world’s largest economy. Treasury yields also advanced, with the 10-year yield climbing seven basis points to 4.08%. This movement reflects the market’s reaction to the robust retail sales data and the trimming of bets on Fed rate cuts this year. There’s now talk about how the Fed could indeed skip cutting further for what is left of the year.
At the time of writing, European Central Bank President Christine Lagarde was explaining in her press conference the ECB’s thinking, which turned sour for the shared currency. Tomorrow, speeches by Federal Reserve officials, including Christopher Waller and Neel Kashkari, will also be in focus for any hints on future monetary policy direction. We shall see how the global narrative finds any improvement after assessment that China’s stimulus programs are not sufficient to create a positive impact for its domestic situation nor any investors who have been handed big losses overnight in Chinese equities.
What to Watch This Week…
- Fed Speakers, Friday
- WEBINAR: Navigation Election Uncertainty – Oct 24 @ 2pm EST
- Monex USA Online is always open
EUR ⇓
The Euro has dropped by less than half a percent thus far this morning as ECB’s decision to cut interest rates was expected, but the presser was giving us mixed signals. Lagarde explained that now risks were more tilted towards the downside, highlighting that consumption ad productivity have grown at a weaker pace than expected. Nevertheless, she also said that the Euro-zone economy is not headed towards recessionary pressures. When asked if she would guarantee another cut at the December 12th meeting, she said “I did not open the door to anything.” We shall see how much room the Euro has to drop, but right now the reaction ha been mild.
MXN ⇓
The Mexican Peso led emerging-market currencies lower, slipping to its lowest level versus the Dollar in a month. This decline is driven by investor jitters ahead of the U.S. election, with the prospect of Donald Trump’s return to the White House causing concerns about potential tariffs on goods manufactured abroad. The market is now in a regime of heightened volatility, with traders recalibrating their positions and flocking to buy USD.
