Buck in Tight Levels Ahead of U.S. and Mexico Meeting

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Buck in Tight Levels Ahead of U.S. and Mexico Meeting

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The U.S. Dollar is trading mostly unchanged as COVID-19 case increases amidst more testing in populous states keeps markets uncertain over the economic future.

Overview

Indeed, the buck does not have much to stand on, safe-haven or otherwise as all eyes are on the progress of the medical situation, which is not showing signs of improvement yet. Disease experts are concerned about the high number of cases and think the death toll could rise significantly, thus erasing any chance of a strong recovery. Furthermore, economic surveys reveal that consumers in the U.S. look to save more and spend less even if the pandemic is contained.

Meanwhile, data out of China and Southeast Asia show that the region is developing a strong recovery, which economists hope can be seen here once the economic reopening is in full throttle and not in patches. It is hard to envision the greenback having much luck against commodity-based currencies at the moment.

The Mexican Peso could experience a lot of movement as it awaits more petroleum production figures and Mexico’s President Andres Manuel Lopez Obrador visits the White House for discussion of USMCA provisions. Discussion over the idea of punishing China by abandoning the Hong Kong Dollar’s peg to USD may continue, but the practicality of such a thing is basically non-existent. Some banks like HSBC suffered equity losses as a result immediately, but these banking interests will stand up for their needs and defend the status quo.

What to Watch Today…

  • No major events scheduled for today

Complete Economic Calendar can be found here.

EUR

The Euro is staying buoyant as openings continue and health data is improving in comparison to our hemisphere. Recent statements from financial officials have also been optimistic even after European Central Bank President Christine Lagarde used an interview to offer a dose of cold reality. She explained that the economy will struggle and the path to get out of this funk will be “constrained, uncertain and fragmented.” Friday’s slew of Industrial Production and manufacturing data will assist in forming a clearer picture regarding a true return to business activity. Any positives will aid Euro value further ad we predict so.

GBP

Sterling rose a bit more on news that the government is already cutting VAT taxes on tourism and other entertainment, which shall reward the economic efforts from the treasury. We believe the momentum is there for further gains, but Brexit is the key factor that could accelerate appreciation or completely shut off its engine. Prime Minister Boris Johnson warned Germany’s leader Angela Merkel that Britain is prepared for a no-deal Brexit and would like to see compromise on fishing rights and other items if this scenario is to be avoided.

Thing is, Europe has also shown signs that they will move on and if it comes to a no-deal situation, World Trade Organization tariffs and costs will start to apply. Mid-July the EU will meet and decide how to spend money together and if there is much the U.K. can do to be a partner in some fashion.

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