Thursday, July 13, 2017

Weakening of U.S. Dollar returns as Yellen downplays pace of hikes

USD
The U.S. Dollar is trading in mostly tight ranges after fluctuating a bit throughout yesterday’s session on Fed Chairwoman Janet Yellen’s comments during her first day of a congressional Housing committee hearing. While most currencies improved against the buck as the Fed head spoke about the need to be cautious when it comes to the pace of hiking rates down the line, although she does indeed see increments in the next few years, the Euro dropped, falling by about half a percent from its highest level in over a year. It may be a signal that the strong rally for the shared currency may be calming down.  
Australian Dollar and its New Zealand counterpart, the Kiwi, both strengthened by about 1.0% based on good news out of China as it relates to imports which matters tremendously to the Oceanic nations. Additionally, the Reserve bank of New Zealand sold off 100.0MM in bonds. The currencies are trading near their best levels of the year.
On more alternative dollar news, the Canadian “loonie” reached its best level since May 3rd, 2016 after the Bank of Canada hiked its main interest rate to 0.75%, the first increase since 2010.

EUR
The Euro lost points throughout Wednesday without any negative headlines out of the ancient continent, but it seems that it reached ideal high levels where most major banks held comfortable long positions. A little profit-taking never hurts, but the currency remains strong especially after Consumer Price Index figures for Spain, France, and Germany all met expectations, demonstrating that inflationary growth is staying consistent.
As negotiations on Brexit get cracking and thus far to the favor of those in Brussels, expect a push by EU lawmakers to make things harder on the British by discussing the need for companies in London to move to EU capitals. For example, France wants a lot of the tech companies in the UK to consider Paris while banking giants are looking for cheaper real estate in Ireland and elsewhere in the bloc. This shall play to the Euro’s favor long-term.

GBP

The Pound gained some ground this morning as markets reacted in favor of the solid labor situation yesterday instead of staying focused on the loss in real wages that inflationary numbers revealed. While economic indicators keep Sterling afloat, the Brexit talks are not going the way Prime Minister Theresa May would have hoped.
Foreign Secretary Boris Johnson has spoken fiercely against the estimates for how much it will cost the UK to leave the EU and EU Brexit Chief Michel Barnier is not having it after the two took some shots at each other. Legally, the UK has to pay and it could be as much as GBP 75MM. The main EU negotiator said Brussels was not seeking “revenge” much less try to extort Britain, as Johnson had put it. When it comes to talks and timing, Barnier said that he doesn’t care about all the noise, that all he hears is just “the clock ticking.” The UK team has been blamed of not having consensus, only worsening prospects of getting a trade deal done before the 2-year mark when divorce process ends. 

No comments:

Post a Comment