U.S. Dollar starts July positive, closes June weaker
JULY 01, 2019
The U.S. Dollar is trading in slightly stronger ranges following news over the weekend regarding talks with China making progress on the trade front as well as a diplomatic breakthrough with North Korea.
While the economic indicators out of the U.S. have dwindled and the Fed has signaled more intervention, the buck is preventing too much of collapse, at least for now. June proved to be a down month for the greenback as it dropped 1.2% in value to close the month according to the Bloomberg Dollar Spot Index.
Manufacturing gauges will provide us some evidence of stability or lack thereof in the sector with expectations just above the minimum for expansion. Construction Spending is also forecast to underwhelm, with an estimate of 0.0% growth, thus any surprise one way or the other could be interpreted as a guide for dollar movement. A Heavy slew of data arrives Wednesday with employment and factory indicators to be released.
The Euro is taking a break after gaining in recent weeks due to doubts over the American economy and renewed hope over the continent’s direction despite some friction politically. The G-20 meeting and other news headlines pointing at optimism have helped ease the pressure on Euro-denominated assets, lifting their stock exchanges, and thus gain ground against safe-haven assets that had an increase in value based on uncertainty.
While the European Central Bank could play a role in bringing Euro prospects down with their dovish sentiment, we foresee a resilient Euro if indeed indicators show Q2 was better than expected. Mid-month we shall be able to see the evidence as we get Euro-bloc inflation and productivity growth figures.
The Pound remains under pressure as weekend news reports established that the Tory party is open to the idea of a no-deal scenario and could cohesively back up Boris Johnson. Some talk of Theresa May forming a rebel coalition within the party that would vote to block a “no-deal” option is also fostering further concern over the health of British politics.
Labour, the opposition, would like general elections rather than a second referendum on the Brexit question. A clash is likely soon as time continues to tick towards the Halloween deadline. Sterling will only go up and stay up, if a solution is described, clarified, voted on, agreed on, and ultimately implemented.