U.S. Dollar up a bit as risk-aversion returns

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U.S. Dollar up a bit as risk-aversion returns

OCTOBER 23, 2019

The U.S. Dollar returned to gaining ground following a day of some market disappointment with renewed uncertainty over Brexit and dwindling stock exchanges following lackluster earnings reports across various industries.

Overview

As investors reviewed missed estimates for giants such as Caterpillar, the buck returned to play a bit of safe-haven as risk-appetite faded. In Hong Kong, the heavy political climate that has seen protests for months, markets fell after reports that China is trying to find a way to replace the city’s Chief Executive Carrie Lam who has been overwhelmed by what became a crisis.

Without any major data slated for today, the focus will remain on what happens on the other side of the Atlantic as it pertains to a Brexit extension. Although oil prices went down, both Canadian Dollar and Mexican Peso remain flat and relatively stronger against the greenback than the start of October. We believe October will close as a downer for the dollar overall as we also approach the Fed’s decision next week on October 30th.

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

EUR

The Euro is slipping a bit as headlines on trade start facing obstacles and economic data keeps showing that the larger member nation economies are truly contracting. Ahead of major Purchasing Managers’ Index figures for the bloc, French productivity indicators and confidence came in all less than expected. Tomorrow also marks a historic day as Mario Draghi will conduct his last meeting and press conference as European Central Bank President.

Former International Monetary Fund chief Christine Lagarde will replace him and many around financial circles believe she will have to be more hawkish than her predecessor. Germany and other nations such as the Netherlands want to cooperate with expanding fiscal policy by spending more, but they also want a more accommodative central bank to their hopes of higher interest rates that help savers.  Many items need to improve on the economic front for the Euro to flourish, but we see the buck staying away from strengthening as a looser policy stance reigns here on the Fed’s side.

GBP

The Pound depreciated by over half a percent as a result of some head-scratching following the Parliament’s vote on Prime Minister Boris Johnson’s agreement with the EU. Although the government won the first vote that approved the deal, the second vote which would have expedited passing of the deal as is and as desired by the PM by October 31st did not go through. The split basically meant that the Parliament agreed to look at the deal but get to amend it and vote on those amendments past the Halloween deadline.

Overnight, the European Union Council’s President Donald Tusk recommended that his officials provide an extension to January 31st. Since this goes against Johnson’s plans, it is likely he will push to have general elections. A no-deal scenario may be gone, but the drama in the U.K. is not and the difficulties of reaching an agreement are not fading. Concessions are getting harder to find.

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