The U.S. Dollar is closing out the week in mostly tight ranges after a roller-coaster week of FX movements marked by confusion and uncertainty
Overview
As markets try to figure out if and when tariffs will indeed be implemented, other developments have made for idiosyncratic moves that have outlooks for currency pairs all over the place. After the first two months of the year, the Buck has dwindled by 1.1% thus far. This week, it could close out with a half percent recovery overall per the Bloomberg Dollar Spot Index, but mixed data releases from earlier could dent the resurgence.
January Personal Income surprised by coming in over double the estimate at 0.9% instead of 0.4%, but Spending took a hit although a 0.2% expansion was expected. Real Personal Spending fell (-.0.5%) as core went down (-0.2%). Personal Consumption Expenditures rose by the estimated 0.3% keeping the yearly average at 2.5%. Nothing is clear about the economy, but Fed officials on their part seemed to all agree in various comments that there is no need to be cutting borrowing costs soon. As geopolitical narratives also shape market moves and reaction, expect more of this lack of guidance with daily items keeping life interesting.
What to Watch This Week…
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Complete Economic Calendar can be found here.
EUR ⇑
The Euro is up by half a percent for the year as these two months have brought both hope and disappointment to the Euro-zone and ancient Continent as a whole. Years of war and stagnant economic progress have made for wild swings for Euro, which had been predicted to be toying with parity to the dollar by this point of the year according to some major bank analysts. Although not across many indicators, there have been signs of resilience and confidence behind the European Central Bank’s stimulus-driven cuts and likelihood that Defense spending will bring on a new era of high productivity for countries like France and Germany. We have mostly inflation-related data out of the Euro-zone next week to see how it impacts value. Tamed inflation would give more room for the ECB to cut into rates by 50 basis points instead of just 25.
MXN ⇑
The Mexican Peso is ending a turbulent week with possible half a percent gain although tariffs could be applied to Mexican products as soon as Tuesday. Regardless of the talk, the Peso has been a beacon of steadiness, staying a half-percent range band for weeks. Economically, the nation is not where it was 2023-2024, but the central bank’s easing measures as well as a solid situation in the U.S., its biggest trading partner, MXN has remained an important currency for investors and traders that has kept it from sinking. We will not hear from Banxico until March 28th so tariff tales will continue to dictate much of the conversation around the currency pair
