U.S. Dollar volatile as trade flips script
OCTOBER 09, 2019
The U.S. Dollar is experiencing a bit of a pullback as statements from Chinese officials on trade pushed stocks forward and reversed gains for the buck the last two days.
Pound Sterling is an exception to this as the political turmoil and the ever so close Brexit deadline continue to put downward pressure on British assets. Additionally, loose monetary policy in the horizon is affecting the greenback’s outlook as odds of an interest cut during the October 30th Fed meeting have increased from around 60.0% last week to 81.1%.
China’s trade negotiators said they would welcome a partial trade deal, especially to ease tensions and improve the globe’s declining demand and manufacturing productivity. Within a week, hopes of progress have gone on a roller coaster ride because last week things looked rosy based on planned visits to Washington, but now a number of Chinese officials have been denied visas while some tech companies were blacklisted. Rapid changes are making forecasting blurry for FX flows as it is hard to gauge guidance.
What to Watch Today…
- FOMC Minutes 2PM
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The Euro is still a winner for the beginning of this month and quarter as it has increased its value by over half a percent in the last week. No major data today, but recent studies on Greece are showing that the bailout program worked with stocks on the rise and reduction in the country’s debt-to-GDP ratio. Portugal is also a member nation with positive focus as recent elections guaranteed a second term for Prime Minister Antonio Costa, who has presided over reforms and fiscal discipline that brought a revival to the country’s economy.
Remember that these two nations were potential candidates for leaving the European Union as their economies plummeted during the financial crisis and austerity had to be enforced. There is evidence to believe the European mechanism works and plans for new European Central Bank President Christine Lagarde to work closer with the bigger countries like Germany and Italy to push growth can be seen as Euro positives as we close the year.
The Mexican Peso has advanced by 1.5% thus far in October rallying with improvements to the price of oil and is being resilient to the dynamics of the U.S.-China trade war. More importantly, economic indicators are aiding its resurgence with inflation coming in expanding as expected, thus defying economists’ predictions that there were deflationary pressures coming.
Peso will continue to be a very vulnerable currency, but if its data backs its strengthening, we believe we shall continue to be accurate in our forecast ranges as we are back very close to target.