The U.S. Dollar is trading in mostly favorable ranges across the board following a weekend of developments that exacerbate concern over conflict in the Middle East.
Indeed, reports over the past few days have explained that talks in Islamabad, Pakistan did not materialize in an acceptable deal, so hostility remains. Naturally, oil prices climbed back up to $100.00/barrel while stocks signal a loss to come for equities as the S&P 500 Index futures dropped by 0.7%. Brent Crude alone has risen by 40.0% since the war began. The safe-haven role for the Buck has returned with most peers around half a percentage lower against the U.S. Dollar, marking its biggest advance in over a week a half.
Thus far, it was announced that the U.S. Navy will send ships to the Gulf setting up a blockade that may add pressure to the traffic issues in the Strait of Hormuz. What seems clear is that the status quo that existed for oil and gas producers crossing that area has been shattered. With energy worries only growing, the White House warned on Sunday that high prices may remain for months ahead. We shall see how this influences Federal Reserve thinking as well. Data-wise there will be some key items to digest this week as we get suppliers’ side inflation via Producers Price Index tomorrow, Industrial Production on Thursday, and Retail Sales on Friday.
What to Watch This Week…
- U.S. PPI on Tuesday 8:30AM
- Retail Sales, Friday 8:30AM
- Monex USA Online is always open
EUR ⇓
The Euro has dropped in value against the Buck but has not plummeted after a weekend that featured key elections in Hungary. A 16-year rule came to an end as Viktor Orban lost election to another term gave the local currency HUF, Hungarian Forint a tremendous boost that saw it appreciate to its strongest level since February 2022. While politically not aligned with European Union goals and having friction on many fronts, the perception of a new regime that is willing to be more integrated is being taken as positive news. This opposition is expected to unlock billions of Euros in EU funding that will flow through an economy that seems to desperately need it. We will monitor how any changes to the narrative about Iran may cause a Euro comeback without hesitation.
MXN ⇓
The Mexican Peso is falling along with other tender as the Buck becomes “petro-Dollar” fueled once again. Mexico’s economy has also been impacted by the lack of enthusiasm over progress in the American situation. After a bit of relief regarding the ceasefire, Peso sky-rocketed and reached its strongest level since start of March. With the Buck having a small relief, watch for MXN volatility which is high also as central bank policy divergence makes Peso a point of focus as high-interest seems vulnerable to cuts unlike in other regions based on official concern that economic momentum is lacking.
