Sterling collapses; Buck riding high

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Sterling collapses; Buck riding high

JULY 09, 2019

The U.S. Dollar is trading at a three-week high against its counterparts as markets await the Federal Reserve Chair Jerome Powell’s testimony to Congress and any news on the trade front.

Overview

Stock indexes around the globe halted their recent surge, hitting the brakes on the momentum built up around the idea of further easing from central banks. Traders and investors are also struggling to find much more to move the market since conflicts involving tariffs, as well as the prospects of monetary loosening, are already priced in.

Chances of a cut for the end of the month are still at 100.0%, but some wonder if Powell will be less dovish. The buck has already gained significantly, almost erasing its June losses, on the idea that the American economy is outpacing other regions by a lot, thus it is hard to see how much better the greenback can get.

We think that some pressure might come from the commentary by business leaders and others who advocate for more competitive prices for American exports, which struggle in such a high time for the buck. We shall see if Powell somehow changes the tide. As of this morning’s NFIB Small Business Optimism Survey, businesses were less optimistic than the month prior.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The Euro is its weakest point since June 19th as it continues to dwindle based on economic shortcomings and growing concerns over the situation in Turkey. A statement by European Central Bank member Francois Villeroy de Galhau hinted at the institution’s determination to help in current times.

On the non-EU side, Turkey’s recent headlines involving President Erdogan’s decision to terminate his central bank chief are worrisome to EU leaders who see this as a breach of power by the Turkish leader. Since Turkey has such close business ties, particularly to Germany, its potential for instability is troublesome for the Europeans. The criticism and animosity that can build from it, does not bode well for the Euro.

GBP

The Pound fell and is hovering around its weakest levels since April 2017 as fears grow that a major economic slowdown will result from Brexit. Politicians are battling arduously as one side is trying to prevent Brexit from coming or happening without a deal. Surveys across the country also show a tremendous dissatisfaction with the handling of the process with now over 40.0% saying the whole thing should be revoked instead of leaving the EU entirely or at all. The disagreement within government, as well as the population, plays poorly for economic activity, which has already taken some damage since the referendum took place.

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