The U.S. Dollar is trading in much better ranges this morning following a risk-off mood as companies and investors across the globe feel the pressures of monetary policy tightening.
Overview
Although we started off the week with optimism over China re-opening more loosely, this does not negate the fact that companies have joined other economic institutions in forecasting negative outlooks with dwindling profits. The high cost of production due to sky-high prices across the board combined with higher borrowing costs from the Fed and other central banks has taken a hold of market sentiment.While the narrative may seem gloomy now, today is a day without much in terms of strong data and there are still risk events in the European Central Bank meeting to look forward to for guidance. Things, in general, do not seem very consistent at the moment. It is stability that the market is seeking but having a difficult time coping with current challenges. That means the greenback has returned to a safe-haven role for now while other currencies return to their lowest levels in years, with the Japanese Yen already down to its 2002-lows.
What to Watch Today…
- No major economic events are scheduled for today
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MXN
The Super Peso has been buoyed by a world of high-cost raw materials and oil demand growth. It is currently trading at its strongest levels over the buck since Q1 of 2020 when the world was shocked by the COVID outbreak.
Additionally, Banxico’s commitment to hike interest rates and a proposal to build major train infrastructure to connect Mexico from north to south seems to be giving MXN merit for appreciation. We feel the volatility in the markets remains high and that at any point the currency could be knocked back down, particularly if there is ongoing doubt about the pace of growth.
GBP
Sterling has been affected by the negativity across markets while also managing a political episode that could mean leadership change down the line. A Tory Leadership Confidence vote yesterday determined that plenty of members feel the party is not in good hands with Boris Johnson, and potentially the country will seek changes.
The PM’s survival did not sink nor help the Pound, but it is clear that there is dissatisfaction with how the U.K. has handled the pandemic recovery, Brexit trade woes, and overall domestic issues that may have been exacerbated by the lockdowns the past two years.
