U.S. Dollar Re-Emerges a Bit After Tumbling All Week. Yen Quite Strong

 

USD

The U.S. Dollar is trading in mostly positive ranges, recovering from a six-day losing streak in which the currency fell to its lowest point overall since November 8th. Ongoing political risk is affecting the overall mood of global markets, which have retreated in a major way. In North America, the Dow Jones Industrial Average declined by 373 points representing the exchange’s biggest loss since September.

There is now a spike in volatility as investors cast doubt over the timing of expanding fiscal expenditures and the Fed outlook is diminished. Chances of a Fed hike are down to 90.0% for June as a result of dwindling economic indicators as well.

Jobless Claims remained a source of good labor news while the Philadelphia Fed Business Outlook impressed with the survey doubling its expected reading. There is some confidence out there amongst businesses that once the focus is back on deregulation, tax reform, and infrastructure rebuilding the economy will grow exponentially. We foresee up and down swings with volatility once again playing a major role in the ebb and flow of FX and equities.

 

JPY 

The Yen has surged by 3.0% thus far this week based on the risk-aversion that swept markets. In addition to downward stocks, the currency is also benefiting from economic expansion after Gross Domestic Product figures revealed annual growth at 2.2% over the expected 1.7% estimate. The revision of last quarter was also revised upward and the country is moving full steam ahead registering its fifth consecutive quarter of expansion. Indeed with the current combo of chaotic markets and solid domestic performance we predict the safe-haven to stay afloat for the remainder of the month with further room for appreciation.

 

GBP 

Sterling increased in value following outstanding Retail Sales figures. Products sold online and at stores increased by 2.3%, exceeding the forecast 1.1% pace. Although recent labor sector data has disappointed and wages revealed contraction, the consumption measure is cause for relief as policymakers weigh the potential negative developments from a hard Brexit.

Negotiations will continue and with conservatives poised to win big in parliament, we feel the Pound will be carried by a wind of confidence in the next few weeks. As always, it’s important to remember that EU lawmakers are not willing to hand away a trade agreement without making an example of Britain, which we do expect to pay a big toll later for voting to “Leave.”