U.S. Dollar keeps strengthening last day of September

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U.S. Dollar keeps strengthening last day of September

SEPTEMBER 30, 2021

The advancement continues for the U.S. Dollar as global equities seem set to close the quarter in losses. 

Overview

Additionally, we can now put away another headline from our minds to worry about since U.S. lawmakers made a deal to extend government funding and avoid a government shutdown. We shall see if global markets calm down a bit from their risk-off sentiment and if somehow the buck starts dwindling. In a surprise piece of data that adds to optimism, Purchasing Managers Index figures out of China were better than expected, although there was nothing but pessimism about their release at the start of the week. The Composite reading for September materialized in an expansion instead of a predicted contraction.

Yesterday, the European Central Bank held a forum with the Fed and other world central bank leaders in which they reiterated their belief that we are not going to see out-of-control inflation and that this is a transitory period economically that affects prices temporarily. We shall see if the narrative changes suddenly as we close September, but for now greenback strength remains. We are experiencing the highest level for the buck, per the Bloomberg Dollar Spot Index, since the start of November last year.

What to Watch Today…

  • BANXICO rate decision 2 PM
  • House Financial Services Committee hearing on Fed and Treasury

View Economic Calendar

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EUR   

The Euro is trading at its weakest point since July 22nd, 2020, as the faith in the buck continues based on yields increasing and a belief that the government, as well as the Fed, will be able to handle threats to the economic recovery. Nevertheless, we wonder how long these levels will last. Christine Lagarde surprised with her comments yesterday as she indicated that this is a “very unusual” recovery that has high prices, but only for some time. Additionally, Spanish inflation grew above the 2.0% level desired by the ECB. It was 4.0%. We shall see if the ECB starts looking to reconsider further tapering as inflation starts giving reason to let the financial environment run on its own.ss activity.

MXN  

Mexican Peso has been moving aggressively and going away from our predicted levels for the quarter. The drop of faith in the global recovery and talks of the energy crisis has pushed MXN down to its weakest point since June. Today at 2 PM, we will see Banxico, their central bank, decides to hike its benchmark interest rate by 25 basis points. FX volatility is high and with no consensus from bank officials, the hike could spark an MXN rally, but of course, no guarantees just hopes from our end for accuracy’s sake.

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