Tuesday, June 27, 2017

U.S. Dollar weaker in face of central bank normalization elsewhere

USD
The U.S. Dollar weakened this morning following commentary by European Central Bank President Mario Draghi on working towards a less accommodative monetary policy. The signal of the ECB slowing down its easing as inflation builds propelled the Euro to its best quarterly performance since 2011. Along with Euro, other major currencies rose by over half a percent against the greenback after poor economic indicators hit the wire once again, adding to concern over a potential slowdown of the U.S. economy.
We will hear from Fed Chairwoman Janet Yellen at 1PM EST to see if her tone continues to be positive. Other Fed officials have reiterated that this year will indeed end with three hikes to the Federal Funds Rate, but outlook on the economy has dwindled across markets. Consumer Confidence later at 10AM might give us further data on the state of consumption, which is a concern.

EUR
The Euro reached its highest level in two weeks as a result of faith in the ECB’s ability to keep a healthy economic environment while preparing to reduce its mark on intervention such as quantitative easing. The current monthly injection of EUR 65billion will end in December.
Additionally, the Euro is gaining on improved numbers out of Germany and the euro-bloc overall as well as less threats to the established order in Italy where Beppe Grillo’s Five Star Movement Party suffered setbacks in local elections. Although, it is crucial to point out that former controversial Prime Minister Silvio Berlusconi’s party has been earning some seats, another political thorn that markets do not welcome fondly.  

GBP

The Pound is up today after fluctuating within a 50-point range in the last few sessions based on uncertainty over Brexit and Prime Minister Theresa May’s efforts to still have a governing majority. The PM’s work with the Northern Irish Unionist Party is finally paying off as the group has agreed to cooperate on the side of conservatives in Parliament. Bank of England’ Mark Carney will be speaking today about growth in consumer lending and his views on the effects of negotiations with the EU.  GBP is vulnerable to losses, but has also been resilient following the shocking elections. 

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