Dollar Steady; Peso Rallies as AMLO Losses Super-Majority

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Dollar Steady; Peso Rallies as AMLO Losses Super-Majority

JUNE 07, 2021

Except for heavy losses versus the Mexican peso, the U.S. dollar opens the week fairly sleepy. 

Overview

Indeed, most of the G10 currencies have experienced little volatility to start the week and a gauge for Dollar volatility fell to a 15-month low.  The Dollar Index is near a five-month low.

Last week’s economic data was nearly all positive, but not spectacular, which will likely allow the Federal Reserve to keep its current policy in place a touch longer.  If the Fed remains dovish, that could spell medium-term dollar weakness.  Over the weekend, Treasury Secretary and Former Fed chief Janet Yellen said that higher interest rates would be a “plus” for the U.S. and the Fed.  Of course, Yellen no longer works for the Fed and is currently trying to sell President Biden’s infrastructure deal, but her words carry great weight for those following monetary policy.

There is no major data on today’s docket. For those looking for volatility, look to the USD/MXN pair.

What to Watch Today…

  • No major economic events scheduled for today

View Economic Calendar

MXN  

The Mexican peso is in rally mode this morning, gaining nearly 1% against its American counterpart following results from yesterday’s mid-term elections.  Mexican President Andres Manuel Lopez Obrador’s (AMLO) political party, Morena, lost its super-majority in the lower house.  While the full results are not yet in, Morena and the rest of their coalition will hold less than 300 seats (out of 500) which is far short of their current two-thirds majority.  The results likely mean that AMLO will be unable to pass sweeping constitutional reforms and the new congress will provide a stronger check to AMLO’s power.

The MXN is now at its strongest level in almost three weeks and may continue to rally as more results come in.

GBP  

The British pound started the week by selling off against the U.S. dollar. In fact, it was the worse performing G10 currency to start the day.  However, the sterling has enjoyed a decent rebound in early trading as is now up modestly against the greenback.

The U.K. has planned to ease coronavirus restrictions on June 21st, but it is unclear whether the government will go through with it as new cases continue to rise.  With the economic docket fairly light in the U.K. this week, reopening headlines are likely to dominate trade.

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