The U.S. Dollar is trading in negative territory across the board at the moment, with global reaction primarily fueling the value of the British Pound.
Overview
Although officials from the Fed have reassured their commitment to hiking in the next two meetings, it seems now that the telegraphed nature of the Fed’s messages is leaving market participants with enough predictability that it may not necessarily aid the buck. Additionally, oil prices have relaxed for about a week primarily as a result of fears that economic growth will slow down enough that demand for fuels will suffer.In China, President Xi Jinping gave a speech highlighting the party’s commitment to economic advancement, support for the tech industry, and hope for better times ahead. Nevertheless, his speech did not include anything regarding getting away from zero-COVID, thus still leaving some uncertainty over the consistency of the economy going forward. For now, FX flows will remain volatile, but we are entering a period of many questioning the buck’s elevated value.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
Euro is rising for now as this week gets going with mostly political activity to watch out for. EU energy legislation will be the focus of a summit between leaders towards the end of the week, and there will be commentary from officials ahead of the European Central Bank policy meeting next week. As mentioned last week, we are closely looking at Italy and the new administration’s hopes to have enough members from multiple parties to form a governing coalition. Reports are that Silvio Berlusconi’s party Forza Italia and new Prime Minister Giorgia Meloni are having some friction.
GBP ⇑
The pound Sterling is seeing better days as markets reward the tender over the government’s decision to do a full U-turn on economic plans. Recent headaches in coming up with an acceptable tax plan and budget have resulted in a dramatic loss of faith in the U.K. government’s ability to maintain a healthy economic environment.
Many analyses lately, including our own, point out that years of economic friction with the EU have led to a less dynamic economy that needs to spend on its nation while securing revenue following a tough pandemic. The problems are real, but at least now, the government seems to be more flexible about working with what it has.
