U.S. Dollar Thrives as Budget Passes, Bad News Elsewhere

The U.S. Dollar is closing its second straight week of gains with a surge of 1.0% overall according to the Bloomberg Dollar Spot Index.

USD

Chaotic markets caused damage to many commodity-based currencies as well, such as Aussie and Kiwi which fell to their worst levels since last summer.

With the passing of a two-year budget agreement by Congress overnight, the development complements a week of good U.S. economic news that propelled the dollar, in spite of steep declines across global equity markets.

Next week shall be more driven towards data once again. Inflationary figures across continents will be released along with Retail Sales and divergent gauges of production. Although the dollar has recovered many of its January losses, it could go back down if there is any sign of a slowdown beyond the tickers on Wall Street.

 

EUR

The Euro fell by 1.7% this week as a result of bad news on the political front and commentary affecting the European Central Bank’s rate outlook. In Germany, there are signs of dissent among members from both parties that are still trying to officially work as governing coalition.

Additionally, German Bundesbank Chair Jens Weidmann said that he believes the Euro-zone’s economy would benefit more from maintaining QE and low rates than the opposite. His statements carry serious weight as he is considered a candidate to replace Mario Draghi as head of the ECB.

 

GBP

The Pound steeply declined as much as 2.5% this week following doubts over the handling of Brexit on the UK side, threats against Prime Minister Theresa May’s position as head of state or her party, and confusion over optimism from the Bank of England. A toxic mix of news brought down Sterling after it had reached its best levels since the infamous “Leave” referendum of June 2016. However, Pound could recover quickly as it has before, especially if monetary tightening is manifested sooner rather than later.