USD losing ground, Hormuz crucial in potential peacemaking

Naturally, and as experienced previously, the news are welcomed by investors and traders, causing oil prices to retreat further, and seem a reprieve in negative sentiment. Meanwhile, it is pushing the Buck downward as it has dropped to its weakest overall level since start of June according to the Bloomberg Dollar Spot Index. Equities look to continue a good run after a four-day streak of gains for U.S. stocks with S&P 500 futures already up by half a percent. Decent corporate earnings have aided optimism regarding artificial intelligence spending and demand.

We are hoping the armed conflict can indeed hit the brakes and that something clear is achieved since other fronts have opened in the Middle East war with Yemen’s Houthis declaring an escalation of attacks against Saudi Arabian shipping in the Red Sea. Oman and Qatar have supposedly drafted a document that can get all parties to put weapons down so those developments will be crucial as the day progresses. Success in diplomacy may turn into further USD losses.

Data later this morning at 9:45am, could rattle the Buck some if Purchasing Managers Index (PMI) figures come out worse than expected. Yesterday presented mixed numbers as Factory Orders surprisingly registered a (-0.3%) contraction while Durable Goods Orders came in higher than expected at 0.5% vs 0.3%. Labor gauges will be out Thursday and Friday with Non-Farm Payrolls the main feature.

What to Watch This Week…

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CAD

The single currency, after taking heavy losses against USD to open this year, is attempting to claw back some ground this morning and has gained just shy of a quarter of a percent against USD. The EUR/USD pair is now sitting much closer to prices last seen just before both the Fed and ECB meetings last month, more in line with the macroeconomic data out of the region. French CPI this morning showed inflation increased 4.1% annually, with Germany’s year-over-year inflation slightly lower at 3.8%.

MXN

The Mexican Peso advanced and is currently moving towards its highest value over the Buck since start of May. July was a month of strengthening with Peso climbing 1.22% as most LATAM-related assets saw better futures. The appreciation is merited with data also showing higher vehicle sales than expected, stronger consumer confidence, and a shock in Gross Fixed Investment from May demonstrating a 1.1% expansion instead of a (-0.5%) contraction. Tomorrow, we get inflation via Consumer Price Index figures from July.