Markets look for trade signature to move on

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Markets look for trade signature to move on

JANUARY 14, 2020

The U.S. Dollar is mostly unchanged as markets digest inflationary data out this morning.

Overview

Expectations for monthly Consumer Price Index growth came in a bit lower than forecast at 0.2% instead of 0.3%, and just 0.1% when excluding food and energy costs. Also, worth considering is the pessimism in the small business sector as the National Federation for Independent Business Optimism survey came in lower than expected and its lowest point since October. Perhaps January readings will later reflect positive vibes from the trade deal between China and the U.S. to be signed by tomorrow.

Indeed, U.S. and China relations are looking rosier with President Donald Trump declaring that China will no longer be considered a currency manipulator, a charge presented against the Communist nation by other trading partners as well. This all should bode poorly for greenback prospects, yet FX flows are rather quiet in anticipation of the pact being signed to give global markets much-desired good news.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

MXN

The Mexican Peso is up by 0.7% thus far this year surging as the likelihood for USMCA ratification increases and a return to risk-appetite hit markets. While oil price fluctuations have not been ideal, the prospect of peace and normalization of trade are seen as positives for an export-driven economy.

While Banxico, the central bank, is expected to cut rates further starting at their February 13th meeting, the intervention is not impacting the currency in a negative way. We do expect these ranges to not be sustainable in the long-run, but emerging markets seem to be looking up for now and Peso is riding the wave.

CHF

The Swiss Franc is mounting a bit of a comeback after losing ground since the start of the year based on the chance that the Swiss National Bank will have to get rid of negative interest rates. Public opinion is pushing for changes as they say their savings could be hurt as already the richest suffer charges.

SNB officials admitted that they were hoping the Franc would depreciate with the intervention, but this has not happened. CHF saw an increase of 1.55% in 2019 gaining from low volatility in markets and fears over trade in Europe and Asia that saw a flight to safety.  

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