USD improved, markets waiting for peace announcement
The U.S. Dollar is trading in favorable ranges after taking hits all week following disappointment in risk appetite, as the tech sector reported some weakness while spending on artificial intelligence continues.
All eyes are on investors as they reassess the valuations of firms that may be throwing money into a bottomless pit. Meanwhile, Oman and Saudi Arabia announced that they have achieved a compromise to end the battle with Houthi forces, but there is no clarity about aggression between the U.S. and Iran, although it is said the Strait of Hormuz has seen more traffic. The ongoing diplomatic back-and-forth is confusing, yet markets are hoping for a weekend with no turmoil and some peace-driven action.
At the moment, markets seem to be in a wait-and-see stance as Middle East tensions appear to be easing while there are key labor figures to digest tomorrow. In the past few days, we have gotten mixed messages, with a very poor ADP Employment Change for July of just 44K jobs added vs. 65K expected. Yesterday, the S&P Global U.S. Composite Purchasing Managers Index was better than expected, but surveys by the Institute for Supply Management revealed contraction in services employment, while prices paid for services were much higher than anticipated. If there is a struggle, the Buck may continue to flounder as traders look for carry trades with emerging-market currencies and lose faith in both inflation being controlled and slow economic progress in America. Friday will certainly bring volatility.
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EUR
The Euro remains around its highest point since mid-June, climbing almost half a percent this week as geopolitics and economic anxiety combine. The S&P Global Eurozone Composite PMI for July was better than estimated; however, June retail sales for the region shocked with a contraction of (-0.3%) vs. an expansion of 0.1%. The Producer Price Index also showed deflation, dropping by (-0.3%), a change from the previous rise of 0.2%. Next week, we will get industrial production, gross domestic product, and employment for the shared-currency area.
MXN
The Mexican peso has managed to gain over half a percent against the U.S. dollar thus far this week, supported by positive data on foreign investment into the country. It was a bit surprising that May’s private consumption was below forecasts, coming in at 1.5% vs. 2.0% estimated. Tomorrow will certainly affect the USD/MXN pair as both countries release economic indicators, with Mexico’s Consumer Price Index for July the main feature. Next week’s data calendar will include plenty of industrial-production-related numbers, but we will also monitor talks regarding the USMCA trade accord and plans for adjustments, since the U.S. did not agree to simply renew the existing pact. Mexico’s President Claudia Sheinbaum has been lauded for her approach and for maintaining friendly relations amid global friction. This could all bode well for MXN value going forward.