July starts with stronger USD, attention on Sintra
The U.S. Dollar is trading in mostly favorable ranges as July begins with some caution, with traders and investors closely monitoring central bank commentary in Portugal and Kevin Warsh’s first international meeting as Fed chair.
Pulse
July starts with stronger USD, attention on Sintra
Newly introduced, the Fed chairman will deliver his first remarks at the European Central Bank Forum on Central Banking, where he may choose to say little and reinforce the idea of not providing forward guidance. For now, the perception is that the Fed remains highly concerned about inflation, like most other financial authorities, and is looking to keep interest rates unchanged or consider hiking them. Thus far, domestic data has supported the Fed’s view that the economy can withstand higher borrowing costs. Yesterday’s improvement across JOLTS figures strengthened that argument and boosted the Buck.
We could see further Dollar advancement as the diplomatic situation in the Middle East appears to be turning negative, after Iran’s delegation reportedly refused to meet with U.S. negotiators in the region following the weekend’s return to armed aggression. The Strait of Hormuz remains a fragile element for the global economy, which is only aiding the Buck’s resurgence as a safe haven. Later today, June’s S&P Global Manufacturing Purchasing Managers’ Index will be released at 9:45 AM, followed by the Institute for Supply Management surveys on New Orders, Employment, Manufacturing, and Prices Paid at 10:00 AM.
EUR
The Euro is losing ground following inflation figures and manufacturing numbers that failed to impress. June Consumer Price Index figures for the Eurozone came in lower than expected, reducing the likelihood that the ECB will pursue another round of hikes anytime soon. Inflation may become somewhat more manageable if the peace deal with Iran proves to be a more consistent and reliable pact. Additionally, S&P Global Eurozone Manufacturing PMI came in only slightly higher than forecast, which bodes poorly for Thursday’s Composite figure and Services PMI. Caution remains the prevailing mode, and the Euro is paying for it as the Buck rallies.
MXN
The Mexican Peso lost almost 1.0% of its value throughout June and could see further losses if central bankers decide to become more dovish. Economic indicators have recently shown some deterioration, yet Mexico has continued to attract a significant amount of foreign investment. Banxico officials left rates unchanged at their last meeting, but as July offers a look back at June productivity and the first half of the year overall, central bank policy could shift quickly.