The United States Dollar is continuing its winning ways for the week and is set to wrap this five-day span just off its strongest point in over a year.
Overview
The Bloomberg Dollar Spot Index continues to hit annual highs, adding on another third of a percent of strength this morning to bring its weekly gains to around a percent. The ‘Trump Trade” has come roaring back to life in the last couple of session, and coupled with heightened geopolitical tension from both the Middle East and Eastern Europe the Dollar is running up the score. This run of USD strength has encompassed both major and minor and emerging market currencies, with very few pairs escaping the substantial damage at the hands of the Buck.
Though USD has moderated its gains a bit since London lunch, prices at the US open are still the best in multiple months against the majority of G10 currencies in particular. EURUSD and GBPUSD are the biggest losers on the morning as below-target economic data both from the Eurozone and the United Kingdom depress the pairs. The potential impact of the incoming Trump administration on both inflation and economic growth has markets pricing in fewer and fewer interest rate cuts from the Federal Reserve through 2025 as monetary policymakers grapple with the potential for renewed inflationary pressure and a superheated economy. By contrast, the Fed’s peers around the world largely look set to continue this easing cycle, thereby substantially increasing yield differentials between the US and other major economies and giving the Buck further room to run up the score. Geopolitical tensions, as well, have given rise to the traditional safe-haven value of USD – all told, the November skies have turned gloomy for all the US’ peers and gale-force winds are only blowing in favor of the Dollar.
After markets receive November’s flash PMI reading from the US, next week should bring about calmer waters for traders. With a US holiday next Thursday, the data calendar is fairly light with the exception of the second reading for Q3 GDP due out Wednesday morning.
What to Watch This Week…
- S&P Flash PMI NOV, Friday 9:45AM
- Monex USA Online is always open
EUR⇓
The single currency’s woes continue to compound this morning, and EUR at one point slid well over a percent against USD but has since moderated its losses to consolidate about a half a percent weaker than yesterday’s close. European PMIs showed a rather grim picture with measures in the bloc’s two largest economies of France and Gemany both contracting far more than expected in November’s preliminary reading. The Eurozone composite PMI also came in firmly in contractionary territory, prompting yet another major selloff for the beleaguered currency. Since the day of the US election, EUR has slid 5% against USD.
GBP⇓
Pound Sterling is also facing the music of Dollar strength this morning, not aided by their own economic releases, and is tracking in tandem with its European peer in losing roughly half a percent of ground against USD so far today. UK retail sales are likely to contract much more than expected in November according to the preliminary reading released this morning, and the annualized figures are tracking substantially weaker than expectations. PMIs also slid in a big way all contributing to Sterling’s decline, and easing bets for the Bank of England have begun to ramp back up after chatter from BoE policymakers tamped such wagers down over the last week.
