The U.S. Dollar is trading in familiar dominant ranges, hitting new highs as the global situation looks dire with ongoing inflation, fears of more accelerated price growth, and uncertainty over how deep of a recession we could be heading towards.
Overview
Housing and Tech sectors are set to hit even more challenges as people stay away from big-ticket purchases and investors see no clarity for how the year will end or what to truly count on for 2023. A gauge of global stocks, the MXWO, is now trading at its lowest since 2020, when the worst of the pandemic hit.Geopolitically, there is worry about drama in other areas beyond the Russia-Ukraine war, with Iran experiencing intense protests while speculation is growing about issues with Taiwan and China. The Bank of England is expected to make a statement on current markets and the depreciation of the Pound. The stronger buck all around is only adding to the feared “Dollar-Doom-Loop,” the self-enforcing strengthening based on fear in markets that drives it stronger in value as a safe haven, which never seems to end now. It is worth noting the Chinese Yuan fell for a sixth straight day, the worst losing streak in three years.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
The Euro dipped further as the situation overall for the EU looks uncertain and worrisome. Besides the energy crisis that has to be dealt with and that we have praised in the cooperation nations have been promoting to solve it, the Euro-zone’s third largest economy will have to demonstrate goodwill as it debuts a far-right leadership of the government.Giorgia Meloni is set to become the first female Prime Minister of Italy, representing a coalition of three rightist political parties: Brothers of Italy, former Interior Minister Matteo Salvini’s Northern League, and former Prime Minister Silvio Berlusconi’s Forza Italia. This is the first government of its type since Benito Mussolini, but all members of these parties claim that fascism and other policies are simply mistakes of a past long ago. We shall see. Gridlock and friction have characterized messy Italian politics since the Euro was introduced.
GBP ⇓
Sterling has hit a record low not seen in over 50 years as markets seem convinced the country is headed in the wrong direction. From an outsider’s perspective, it looks like the pandemic, Brexit-related unresolved woes, and the lack of a plan that satisfies how to tackle both inflations, as well as lack of growth have finally produced enough downward pressure on the economy and the image of the country that Pound is sinking without hitting the brakes.10-year treasury gilts yields are the highest since 2010, indicating there is fear about long-term prospects for economic stability and order. The U.K. must step up big time if any of this is to change while having to admit that it is not one of the most dynamic economies in the world nor a country capable of intervening much in FX, with U.K. foreign currency holdings being at low levels compared to advance nation peers.
