Neighbor in trouble, markets look holiday ready

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Neighbor in trouble, markets look holiday ready

NOVEMBER 26, 2019

The U.S. Dollar did not move much overnight with the exception of gaining against the Mexican Peso as the neighbor to the south is experiencing a dip into recession.

Overview

On the trade front, investors keep looking for signs of positivity, which they found in commentary from Chinese officials that said both parties had “reached consensus,” and would remain in contact on the subject to iron out details. On the other side of the Atlantic, the Pound slipped slightly on anxiety over the election campaign.

We will get some domestic figures in the form of New Home Sales and Consumer Confidence later at 10 AM as well as some more data tomorrow, but we doubt how much effect they can have as traders are on a wait-and-see approach to headlines and we prepare for holidays starting Thursday.  We think the buck may not change much unless Gross Domestic Product growth is surprising in some way.

What to Watch Today…

  • New Homes Sales 10 AM
  • Consumer Confidence 10 AM

Complete Economic Calendar can be found here.

EUR

The Mexican Peso is down by half a percent today but maybe bound for deeper losses as the country seems to have entered the recessionary territory. Indeed, GDP figures for the third quarter and the yearly average revealed a precarious situation with no growth for Q3 and now the annual rate at (-0.3%). Naturally, the trade concerns have impacted developing markets the most with commodity prices mostly stuck and political friction deterring progress.

As Tempus has mentioned in the media, the growth in China, India, Brazil, and Mexico are worrisome, with assessed growth levels at historic lows. In Latin America, the quality of life has actually decreased in the past decade with the lack of growth that was experienced at the beginning of the century. The Peso is fluctuating around the levels we forecast, but there is room still for depreciation, perhaps welcome for a country that will push to export more to get out of the rut.

GBP

The Pound only dropped slightly, but the woes and anticipation continue as political parties try to make an argument that includes a vision other than Brexit. The Conservative Tories are favored by the market to win, but it looks like they do not have an easy path according to the latest polls.

On the British side, the media battles over being the most accurate predictor as the last two times people went to vote, Brexit and the Theresa May snap election, the polls and surveys were awfully wrong and failed to foresee the actual results. We see no clear victory for either side, but the Pound is likely to rise as desensitized markets keep playing along with kicking the can down the road.

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