Concerns over U.S. growth and politics taking out U.S. Dollar gains
The U.S. Dollar is weak and markets
across the globe are following suit following a devastating week for the White
House and the Republican-led Congress. Much of the excitement that brought
along gains for stock indexes and appreciation for the greenback the past four
months, was based on President Trump’s promise to use his mandate to fix healthcare,
deregulate, reform taxes and spend massively on infrastructure. Faith in
the administration’s approach to governing thus far is going down big league. Meanwhile,
the political uncertainty that clouds the European continent is now a reality
for the United States in terms of gridlock.
This week will be another busy one with
events potentially affecting the “buck” further. Fourteen officials from the
Fed, including Janet Yellen, will speak throughout the week and Purchasing
Managers Index as well as Gross Domestic Product data are slated for release. The
spotlight now more than ever will be on American economic sustainability as
well as the government’s ability to coordinate its efforts efficiently.
Friday’s vote cancellation casts doubt on the administration, Republican
leadership, and the future of implementing the agenda set out during a wild
campaign. USD is near its worst levels since October.
The Pound had a strong surge ahead of its pivotal date with destiny
as the UK prepares to officially separate from the European Union by invoking
Article 50 of the Lisbon Treaty on Wednesday, March 29th. This is no small thing, but investors and
traders seem ready, having priced in the move and I assume looking forward to
the separation. We strongly believe the Pound will be under pressure as negotiations
with the European leadership begin.
Germans, as well as other lawmakers, are
readying to bring their views to the table, which may not agree with UK exit
plans or trade hopes. The UK could face tremendous fees to the EU as it also
struggles to keep companies from feeing its shores. Furthermore, the Bank
of England believes the Brexit is a huge financial risk and wants to gauge lending
banks’ abilities to withstand worst-case scenarios. They expect negotiations
and change in dynamics will test contingency plans across the board.
The Euro is revived after good news for German Chancellor Angela
Merkel’s political party during the weekend. The Social Democratic Party achieved an important
victory in the Saarland region, a nice start to the election year for the party
and their biggest win in that left-leaning region in the last thirteen years.
Martin Schulz, the former EU president and current main candidate to follow
Merkel, has energized the centrists and reduced concerns that German elections
would hand power to alternative newcomers or rightists with an anti-trade as
well as anti-immigrant campaign agenda. EUR is at a four-month best.