Buck dominates as Euro-zone struggles continue
The U.S. Dollar is starting the week in mostly favorable territory as chaos mounts in Europe and risk appetite fades.
Indeed, the political crisis developing over the troubled finances of major eurozone nations is causing havoc for the shared currency, which has now dropped to its weakest level against the buck in 17 months. There is fragility across asset classes in an environment characterized by tighter financial conditions and the risk of even higher oil prices down the line. Fiscal policy gridlock is a major concern as investors hit the brakes on purchasing European assets and a selloff in French, German, and Italian government bonds gains momentum.
Meanwhile, in emerging markets, the Brazilian real rose rapidly, gaining as much as 3.3% against the USD and marking its biggest jump in four years. This follows first-round election results showing Flavio Bolsonaro leading incumbent President Luiz Inacio Lula Da Silva. Bolsonaro is perceived as the more market-friendly candidate, which explains the positive reaction in the BRL. The two will face off in a final round on October 25th. On the domestic front, this week features a few key data points: Purchasing Managers' Index figures for September later today at 9:45 a.m.; the minutes from the Fed's last meeting on Wednesday; and the University of Michigan Consumer Sentiment survey on Friday.
What to Watch This Week…
- Fed Minutes, 2PM, Wednesday
- University of Michigan Consumer Sentiment, Friday
- Monex USA Online is always open
The complete Economic Calendar is available here.
EUR
The euro is facing major challenges as the situation in France draws global attention and political upheaval mounts in other eurozone countries. The currency has fallen to a seventeen-month low amid a resurgence in the U.S. Dollar, driven by rising oil prices and record-high Treasury bond yields. Meanwhile, protests are mounting across Europe amid growing dissatisfaction with the quality of life and concerns over fiscal deficits. Centrism, which is key to governing across European countries, is under threat, and legislative bodies are finding themselves at odds over how to tackle the problems at hand. In Spain, Prime Minister Pedro Sanchez has called for an early election as the government deals with policy paralysis. The election is set for November 29th.