U.S. Dollar king as EU, U.K. cut their forecasts

The U.S. Dollar remains on its rally as global growth outlooks look ready to be downgraded.

Overview

Declining numbers across the globe are solidifying the buck’s safe-haven status, a familiar feeling to what was happening ten months ago. Although the Fed sounded pessimistic and dovish to start 2019, the rest of the world’s financial heads have followed suit and the greenback cannot help, but naturally benefit.

Data-wise, the week will close quietly since no figures are scheduled and labor health statistics in the form of Initial Jobless Claims did not surprise. On the Oceanic side, it is worth noting that Aussie (AUD) and Kiwi (NZD) are falling apart as both of their Reserve Banks have signaled willingness to cut rates down the line. New Zealand’s jobs data showed unemployment increasing from 4.0% to 4.3% in Q4. Chaos elsewhere means a strong buck with six straight sessions of gains.

What to Watch Today…

  • • No major events scheduled for today.

EUR

The Euro is down and looks frail, susceptible to further sinking at the rate economic indicators are painting a dark picture. Contractions in various sectors of the economy caused the European Union to officially cut its growth forecasts from 1.9% to 1.3%. Additionally, faith in Italy seems to be disappearing fast after budget battles since the EU went as far as reducing their forecast on Italian growth from 1.2% to just 0.2%.

Many elements in the Euro-bloc are failing to materialize such as a coordinated rise in economic well-being for the region that we deem necessary for Euro appreciation this year. With figures dropping instead of going upward, our predictions for stronger Euro are looking blurry next three months.

GBP

The British Pound fell originally after the Bank of England’s announcement to maintain policy unchanged, while noting downgrades to its Gross Domestic Product and Investment forecasts. Governor Mark Carney said that indeed the impact of Brexit is felt and thus it is appropriate to believe there will be shortcomings until a clear solution to trade is achieved. Sterling then recovered to yesterday’s levels.

Ultimately, the fundamentals of the economy are not under major threat, yet, and the monetary policy committee unanimously kept policy guidance on rates the same for now. We think that the upward swing Pound experienced post-BOE points at confidence in the markets that some sort of deal or a reversal of the process will be attained.