U.S. Dollar no longer sinking as investors re-examine possibilities
The U.S. Dollar is trading in slightly
improved ranges this morning following a crushing blow after Friday’s failure
to repeal and replace former President Obama’s signature health legislation. The
past two weeks witnessed the greenback depreciating by 2.5% against major peers
according to the Bloomberg Dollar Spot Index. Today’s main event that could
aid in turning the tide for the “buck” is Janet Yellen’s speech at 12:45PM regarding
Data-wise, earlier we saw the release of
better than expected Wholesale Inventories, which grew 0.4%, but were revised
downward for the month prior when they contracted. Some inconsistencies with
indicators may be cause for delaying hikes as seen with Durable Goods Orders.
We see the dollar’s chances for a surge later on as developments in Europe unravel
and focus stays on a more economic-driven agenda that includes tax reform, a
plus for Wall Street, and infrastructure, a plus for America.
Commodity-based currencies are still under pressure because of
swings in the prices of oil and raw materials. Iron Ore prices dwindling have
negatively impacted AUD and NZD. Additionally, South African Rand is steeply declining, mainly as a
result of political turmoil. President Jacob Zuma is ready to fire Finance
Minister Pravin Gordhan based on mismanagement of state funds and industries.
However, the two have been known to clash based on ideology as the President
has seek “radical economic transformation” while Gordhan kept spending in
check. ZAR is 4.0% down for the week and it’s only Tuesday.
The Pound is trading near its best levels in a month and half as
the world prepares for the official Brexit process to start tomorrow. Good news for Sterling came in the way
of compromise yesterday as UK officials agreed to maintain some rules and laws
in place even as they negotiate a separation from the European Union. The idea
is to soften the effects of Brexit, both speculative and tangible, since many
economists fear that the next two years could lead to hardship.
Clearly, British leadership will not back
down from demanding sustainable trade terms and will minimize any financial
costs. Some member countries are already demanding an amount of EUR 60-70
Billion in fees, a point of major disagreement. We will not know until it
happens, but we believe there will be pushback from both sides from the
beginning and there will be attempts to make an example out of the UK by the
more hardline pro-Union leaders. The Brits also need more people involved
in the talks as their numbers of individuals with expertise in EU matters are
The Euro remains around its highest point since November, staying
strong after improved odds of a victory by Emmanuel Macron in the upcoming
Presidential election. Currently,
Macron has a 69.0% chance to win, a dramatic improvement from the start of the
year when rightist Marine Le Pen dominated headlines. Polls and survey skeptics
have reason to be concerned after the surprises of 2016, but the loss of
excitement that pumped alternative candidates and parties across the continent
seems to be fading.
The AfD, alternative for Germany, a
radical anti-establishment party looking to defeat the democratic socialists
and deviate from international agreements, has also lost popularity. A poll
at the start of 2017 showed that 15.0% of the population agreed with AfD on
matters of refugees and economic stagnation. Elections in the Saarland
region showed their weakening appeal with just 6.0% of the votes.