The U.S. Dollar is down after a streak of gains that carried it to a 5-month high.
Overview
The rally has come to a halt based on improved mood across markets in overnight sessions in which European earnings surprised. While yesterday was characterized by big drops across equities, sentiment is on the recovery while the world awaits a solution to the Mideast crisis.
If the Buck was buoyed by central bank policy divergence last week, the cause for the strengthening in recent days came as a result of establishing the Buck as a safe haven in the midst of physical warfare. Israel is being talked down from elevating the already tense situation into an all-out affair that would surely pull in other actors. Saudi Arabia and the United Arab Emirates released a joint statement calling for regional “self-restraint” to avoid more chaos.
Still, markets can, at times, ignore disaster, and traders, as well as investors, are looking for ways to reignite risk appetite. Volatility seems to have returned with bets for stress down the line, although the picture shows strength for the U.S. economy. Additionally, items such as Gold are near all-time record highs. There is a lot more concern for what is to come for the remainder of the year, with complexity closely tied to anxiety about time just flying by. For now, the Buck’s dominance can take a seat to vulnerability.
What to Watch Today…
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EUR ⇑
The Euro is mounting a comeback of less than half a percent, but at least putting the brakes on days of the dollar climbing against it and bringing it to its weakest value since November. March Consumer Price Index figures came in as expected, with an annual average of 2.4% inflation. This complements a good session for risk-taking in which companies thought to be reporting poorly surprised with upside. In recent data points for confidence and productivity, the Euro-zone is trying to pull away from contractionary thinking. We see cuts by the European Central Bank arriving before the Fed, but this may, in turn, help the prospects for growth and make the shared currency attractive long-term. This is typed as Europe is smacked in the middle of what could be turbulent times if Iran and Israel do no cool heads.
MXN ⇑
The Mexican Peso was not looking very “Super” yesterday as it dropped by over 2.0% at one point in FX trading, falling to its weakest point since the end of February. A major unwinding of carry-trade positions took away from the Peso, which has been the best-performing currency since the end of 2016. As volatility rises and the U.S. experiences advancement, investors dumped their MXN regardless of its high risk-reward ratio. Furthermore, the downfall can also be credited to growing tensions in Latin America, where recent spats have left leaders less aligned with one another and even verbally insult each other while questioning the legitimacy of the regional alliance. The emerging-market world is not experiencing growth; the U.S. is only making room for different types of leadership to rise in elections.
