Update from North America

USD resurgence halted as risk-taking advances

2 min read

The U.S. Dollar is losing ground across the board as global markets breathe a sigh of relief, with risk appetite on the rise and oil prices hitting the brakes.

For now, equity markets worldwide are rising, with S&P 500 futures up close to half a percent, while even European markets are surprisingly upbeat, with the Stoxx Europe 600 up by over 0.7%. The former is on track to reach a new record high amid the broad global advance. Meanwhile, West Texas Intermediate crude prices fell by 2.2% to $87.48 per barrel. All asset classes are on the rise, with cryptocurrencies and gold also climbing.

The buck’s sudden loss of momentum comes after a wild September that ultimately helped the U.S. dollar achieve its strongest monthly performance since June and its third-best performance of the year thus far. A somewhat light week for data releases will leave markets at the mercy of headlines, but traders and investors will be looking forward to tomorrow’s release of the Fed minutes for a deeper understanding of how Fed members reached a voting consensus at their last meeting. This factor was a key catalyst for the resurgence of the buck in the latter half of last month.

What to Watch This Week…

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EUR

The euro is finally recovering after dropping to its weakest level against the U.S. dollar in seventeen months. France remains the epicenter of trouble for the continent, as hundreds of schools were shut down amid massive student protests. Nevertheless, financial markets took a breather as yields on both French and German bonds declined substantially. Comments from presidential candidate Marine Le Pen about her goal of reducing the country’s deficit to below 3.0% of gross domestic product seemed to satisfy investors, but confidence remains fragile.

MXN

The Mexican peso found relief in news from the U.S. that reduced the likelihood of a diesel import ban. As a close trading partner, the Mexican economy depends heavily on the free flow of diesel between the two countries, and any friction was deemed by a key member of Congress to be too much pain to bear at a time of uncertainty. It is also a time when politicians are concerned about their messaging immediately before elections. Talk of rewriting the USMCA trade pact and changing energy flows can have a negative effect on the Mexican peso, but anything that refutes these possibilities counters that effect and changes the narrative.