U.S. Dollar slightly better against EUR as Draghi sets dovish tone
The U.S. Dollar is trading in mixed ranges in anticipation of an
eventful day. Against its major counterparts, the “buck” gained overnight while
losing to neighborly Canadian Dollar and Mexican Peso. The former improved based on a strong
surge in home prices, the best in a few decades in Toronto, and the latter on
Banxico’s move to set the FX rate, which has strengthened based on less concern
over a potential cancellation of NAFTA and increased value as a carry-trade
currency. It is worth noting that Mexico’s central bank is focused on
combating strong inflationary growth with increments in their interest rates.
In terms of data, Jobless Claims in the
U.S. came in just slightly above expectations and the last figures were revised
upward. I believe it is safe to say labor sector is solid on that front. All
eyes will be on the testimony by terminated former FBI Chief James Comey whose
words might spark some interest. Meanwhile, in Britain, the people will vote
and the Conservative Tories will be biting their nails after a late-campaign
poll surge for Labour. Reaction on GBP/USD will be monitored, election
results clear on Friday.
The Euro seemed bound to gain this morning, but reaction thus far
has been muted to the removal of guidance on interest rates being cut any
further in the future.
This means that the ECB officials see no need to continue on a rate-cut path,
but the issue of downgrading the inflationary forecasts for the next two years
had a negative impact on the shared currency. President Mario Draghi did not
speak with a highly optimistic tone while still pointing out that economic growth
is now more balanced.
His presentation focused on the need for
fiscal measures and financial reform that can result in much more sustainable
advancement for the Euro-bloc. Since inflation remains subdued, the ECB will
exercise patience and the wait-and-see approach will stay to keep an accommodative
monetary environment. EUR is about half a percent lower than yesterday.
The United Kingdom is out to vote once again. Prime Minister Theresa May is hoping to
have a firmer grasp of the legislative branch if her party achieves a larger
majority within Parliament. Nevertheless, recent polls cast doubt on the
Tories’ ability to even hold on to some of their seats, which could prove
crucial to maintaining the advantage they currently hold.
The British have put up with a terrible campaign season from both
sides that have increased anxiety over Brexit and also the future of some key
social programs. On
top of it, there is a sense of insecurity like never before after awful acts of
terror tied to Islamist extremism. We will see the reality of the outcome sink
in tomorrow when all votes are counted, but we sincerely wish that everything
goes smoothly and that the population faces no threats to their democratic