The United States Dollar is broadly a bit stronger this morning as elections around the world continue to weigh heavily on international risk sentiment, with focus switching this week from emerging markets over to the European continent.
Overview
The Federal Reserve is also due to announce its latest policy decision and dot plot on Wednesday afternoon, adding to a generally nervous atmosphere globally. A jam-packed data calendar this week is likely to keep volatility high and traders nervous.
The European Parliamentary elections over the weekend are keeping the economic bloc in focus today, with the Euro itself under heavy pressure. The ruling parties in France and Germany both suffered significant defeats as both ceded substantial ground to far-right parties. The extent to which France’s Emmanuel Macron lost ground prompted him to call for a snap election, hoping to claw back some losses against Marine Le Pen’s National Rally party on a national rather than international stage. This is quite a gamble, however, and could fairly easily end up backfiring. German Chancellor Olaf Scholz also found a similar defeat, placing the economic futures of the Eurozone’s two largest economies in question. Political uncertainty, unexpected while not necessarily unprecedented, could possibly trigger some resurgent inflation in the Eurozone if such instability prompts a weaker Euro. Electoral surprises have already proven to be quite the driver of FX pricing through this young month following shock results in Mexico, South Africa, and India, and the rest of the year looks to follow the same trends.
Not to be outdone by its counterparts overseas, the United States sees May’s CPI release on Wednesday morning shortly before the Federal Reserve will release its latest policy decision and statement. Though it’s all but guaranteed that the Fed will choose a ‘hawkish hold’ this time around, markets will get an updated dot plot as well. Weighing a violently mixed bag from April and May will likely continue to be quite the challenge for the Fed, and all eyes will be on Jerome Powell’s press conference for forward guidance.
What to Watch Today…
- UK GDP, Wednesday
- US CPI, Wednesday 8:30 AM
- FOMC Meeting and Press Conference, Wednesday, 2 PM
- Bank of England Meeting and Press Conference, Thursday
- S&P Global Composite Flash PMI, Friday
- Monex USA Online is always open.
EUR ⇓
After European Parliament elections further muddied the international political backdrop over the weekend, the single currency has fallen roughly half a percent against the USD to open trading on Monday morning. This continues a three-day stretch that has seen EURUSD depreciate more than a percent following Friday’s upside surprise on employment figures out of the US. French government bond yields jumped on the news of a snap election, hitting their highest this year. France’s domestic snap vote is likely to focus heavily on the nation’s economic woes, which prompted S&P Global to downgrade its credit rating last month.
MXN ⇑
Mexican Peso’s wild losing streak continues this morning, albeit with quieter moves than markets saw last week, but still, to the tune of roughly three-quarters of a percent against USD today after election results confirmed last week that Claudia Sheimbaum’s coalition did obtain a supermajority in the lower congressional house and came close to that threshold in the Senate as well. Mexican Peso’s 7-day losses against USD are now at an eye-watering 9.5%, compounded by traders around the world unwinding long positions on what was previously the best-performing currency in the world.
