The U.S. Dollar is dominating across the board this morning, starting off July at the best overall level since the peak of the pandemic in March 2020.
Overview
Although there was a positive development in talks between China and the U.S., markets seem to believe at the moment that recessionary pressures are inevitable as the supply-chain woes continue in the midst of higher borrowing costs to cool inflation. Indeed, the determination displayed by central bankers after they met in Portugal to cool down inflation by taking away years of quantitative easing and zero-percent interest rates has convinced markets that there will be some tough times ahead.With July representing holidays for many, there may be a slowdown in headlines as we take this month to reassess the first half of the year. Ultimately, the war and its effects will continue to cloud progress in other areas, even if the U.S. is ready to lessen tariffs on China from the previous administration. For now, the blurry future remains filled with questions over how to overcome post-pandemic stress and alleviate the damage caused by years of uneven recovery. In such an environment, expect the buck to hold steady and maintain strength.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro dropped to a fresh new low as it hit the weakest point against the buck since 2002. Germany is worried about ongoing stagflation and the reduction of gas imports from Russia. It is possible it will bailout one of its biggest energy companies while still looking for alternatives, such as Turkey and Qatar, for energy help.
It should be seen as a positive development that China and the U.S. are talking about friendly trade terms. We shall see if this negative move proves temporary as we believe that the European Central Bank will give reasons for having faith in economic resilience.
GBP
Sterling fell to its weakest level in over two years as markets reward the buck for a pessimistic future. Although some items are developing that could erase the losses, the Sterling faces tremendous challenges as the economy copes with Brexit-trade headaches and a lack of cooperation when it is most needed with its largest trading partner.
Additionally, there is plenty of belief that the U.K. will be heading towards a recession by end of the year. Nevertheless, June Purchasing Managers Index figures painted a better picture than expected with expansion in the Composite higher than forecast. We shall see if the buck can remain buoyant or if this rally is short-lived.
