The U.S. Dollar rallied during yesterday’s trading session based on negative developments on the other side of the Atlantic.
Not only was Prime Minister Theresa May’s Brexit deal voted down by Parliament, but she faces the risk of losing her job later today as a confidence vote on the government is scheduled for 11:30AM.
Furthermore, European Central Bank President Mario Draghi spoke in dovish terms as he showed concern over slow economic indicators during his Annual Report presentation to EU officials. Naturally, the greenback is looking like the one attractive asset to hold onto with so much doubt elsewhere. We could not get Retail Sales figures as the government continues to be in a shutdown that prevents statistical releases. This is in no way negatively impacting the dollar. Expect plenty of sharp moves for the majors as we head towards noon since the confidence vote result in Britain will help move other variables.
What to Watch Today…
- • Confidence Vote in the U.K. 11:30AM
The Euro had a steep decline resulting from a negative-sounding Mario Draghi. Indeed, the head of the ECB admitted and confirmed that he is worried about the economy’s underperformance. Recently, monthly and quarterly gauges have failed to impress throughout the Euro-zone and this is of concern after some officials within the central bank pointed at worries over the status of multiple banks, thus worrying about contagion.
The ECB just stopped its QE program and they were helping with other measures that put toxic assets on their books. This had all been done to help spur an economic revival in the continent after the crisis, but if this trend of stagnation keeps going or worsens, ECB may need to intervene again, which plays quite poorly for Euro appreciation prospects.
The Pound may continue its wild run as it faces a key moment for the United Kingdom. A change in leadership is quite possible as Parliament gets ready to try ousting PM Theresa May, whose efforts at reaching an agreement that safeguards the country from trade chaos achieved very little. While the European Union may need to reconsider how to help its partner from an economic collapse, there seems to be an understanding in Parliament that a no-deal Brexit is a devastating idea.
We think a lot can happen because so many things are up in the air right now, but one thing we do believe will occur is a speedier process towards achieving something or reversing the process. We think likely the people will be allowed to vote on the question again in order for “Stay” to win out so the government can say they are doing the people’s will, not “taking back a mistake.”