Buck Hits Brakes on Downfall; Virus Damage Rises

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Buck Hits Brakes on Downfall; Virus Damage Rises

The U.S. Dollar is up this morning, rising as markets reassess market growth in the midst of devastation from COVID-19.

Overview

Unfortunately, the week does not close with any good news on the medical front as the most populous states are experiencing record deadliness from the surge in infections and hospitalizations. As equities rise, economic anxiety grows because it feels untied to the reality and uncertainty millions face because of the after-effects of the sector-wide economic shutdown.

Additionally, political distractions are adding to concerns about trade tariff proposals that could hinder progress. Overall, the FX market does not know if to fully abandon faith in the buck one week or pile on to it for safety as global growth could subside further the longer it takes for the U.S. to return to efficiency and productivity.

Data wise, the U.S. is seeing some uptick as inflationary growth grew more than expected in the form of Producer Price Index figures for June, which revealed a better than expected rise of 0.3% over 0.1% excluding food and energy. Meanwhile, Canadian Dollar and Mexican Peso could see a return to strengthening after the International Energy Agency stated they expect demand for crude oil to increase as economy recovers while production cuts remain, and stockpiles of inventory are reduced.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

EUR

The Euro is trying to eek out a gain for the week with the advance representing just a boost of 0.5% after some progress in negotiations for passing the big rescue package. Additionally, economic data is providing evidence of a better situation in the Euro-zone as Italy saw tremendous expansion to Factory Orders and French Industrial Production, meaning the bigger countries are roaring back.

Today, we are seeing some talks about tariffs being imposed on France by the U.S. in a tussle over new taxes France is levying on international technology companies. We shall see if indeed the momentum can hold for the shared currency, we feel there is room for growth, but not all is smooth. There will be obstacles, primarily tied to a renewed effort to address perceived discrepancies in trade fairness.

GBP

The Pound rose 1.2% this week based on a determined U.K. government looking to spend on infrastructure and dole out funds to maintain a friendly environment for economic recovery. A round of Brexit talks came to an end this week with some progress in tone while some old problems continue to drive the two parties further apart.

One major item to tackle that did not foment harmony was access to financial services and futures clearance. Equivalence arrangements need to be made or there is a huge risk to how swaps are done. The financial system could face chaos if a no-deal scenario is what we get without guarantees of equivalence, even if temporary to avoid instability

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