Mixed Ranges as U.S. Dollar Rally Comes to a Halt Based on Strong Data Elsewhere

USD

The U.S. Dollar is trading in mixed ranges as markets assess good economic data and the short term future of trade agreements. On paper, the U.S. economy is showing labor and manufacturing consistency and it coincides with improvements seen in Euro-zone as well as the UK. Manufacturing had a good end of the year in the western world; however, traders are coping with uncertainty in terms of policy fueled by downgraded outlooks and unprecedented developments.

For example, Ford’s CEO decided to make it public yesterday that the company would not pursue plans for a plant in Mexico and instead will focus on creating jobs in Michigan. In what may considered a major slap to NAFTA and globalization as a whole, Trump is doubling down by promising to place tariffs on those companies who do not follow Ford’s footsteps. MXN is now trading within two tenths of a percent away from its worst exchange rate on record.

The December FOMC Minutes will be released at 2PM and we have quite a slew of data for tomorrow that could certainly impact the greenback’s fluctuation. Although the dollar lost ground overall against most peers, emerging-market currencies are trading at their least volatile levels in 17 months. This in turn is good news for a bullish market enjoying some risk-appetite.

 

EUR

The Euro rose after swinging wildly yesterday on the basis of good economic data combined with fears over downside political risks. Indicators showed that both manufacturing and services are on the rise and inspired a positive return stock-wise as well as erasing the damage the common currency suffered last week. Additionally, inflation is the highest in three years for a resilient Germany and unemployment keeps declining in troublesome Spain.

The economic situation is more solid as the year begins, but doubts remain. For one, the ECB may see room to tighten policy, but the accommodative environment could prove too fragile to mess with too soon. Also, the policies that have led to growth, though anemic, may be under threat with a surge in populist politics.

It’s not just proposals from the dissatisfied alternative parties, but actual changes to implementation and packaging by those in power in order to appease the masses and keep hold of their parliamentary seat, etc. Expect Euro to continue fluctuating unexpectedly throughout the next few sessions if not first month of the year. A hard Brexit may be closer due to the UK’s main EU representative quitting suddenly and leaving Prime Minister Theresa to look for a British pro-Brexiter European insider. Good luck to Europe.

 

CAD

The “Loonie” gained yesterday resulting from an increment in oil prices and those of commodities. AUD, ZAR, and others also rallied as metals went up in value. Copper went up by 0.6%, Gold increased by 0.7%, Nickel by 1.1%, and oil future contracts climbed 1.2%.

Optimism behind China is to be partially credited as well as commitment by OPEC nations to curtail oil production.