U.S. Dollar falls further as confidence grows elsewhere
The U.S. Dollar remains on its weakening trend ahead of today’s
vote on healthcare overhaul by the Senate and the currency is in the midst of
losses to political risk as well as economic performance divergence. Data recently has shown that American indicators
are meeting expectations, while overseas they hit record-highs as the European recovery
shows vast strength. The greenback is now trading near its worst level since
August of 2015 against the shared currency.
The tumultuous pressure on the dollar can only be eased if perhaps
there are signs of less gridlock in congress, but at this point that looks a
Fed-wise, we think discussions over winding down the balance sheet and
confidence over future gradual hikes could have an impact, but there is little
to stop the dollar’s bleeding.
Durable Goods and GDP at the end of the week will be crucial to set
a more positive tone if there is reason for it. Oil prices may be on the up and up after
news of deeper production cuts by Saudi Arabia, but MXN and CAD continue their
fortunes off of their non-energy sector.
The Euro keeps on climbing as now
confidence grows. The German IFO business climate survey improved to its
highest reading ever while in France their confidence gauge reached the best
level in six years. It seems like the bigger economies feel more than just
fine about progress being made, while the European Central Bank maintains a
strong economic outlook yet wants to contribute in steadying the flow of quantitative
easing. There is plenty to excuse the Euro’s momentum and dollar-bulls will
have to wait and see at what new high level there is profit-taking to see a
reversal in greenback losses.
The Pound is surviving in the face of complicated negotiations over
the best deal for Brexit as parties consider a transition period for trade and
then a full abandonment. Liam
Fox, a strong advocate for a hard Brexit admitted that it will be difficult to
have a trade deal with the EU set up prior to the Brexit 2019 deadline, which would
mean maintaining key trade terms for an undetermined period of time. It is
not clear what direction the talks will go, but the EU is determined to charge
a fee before the UK starts putting together their needs in the form of a new deal