The U.S. Dollar is trading in much weaker ranges in comparison to last week.
Overview
Although the Federal Reserve seems determined to fight inflation with interest-rate increases, tomorrow’s awaited Consumer Price Index figures are going to play a role in establishing inflationary expectations for what is left of the year. Investors and traders are hoping the print shows that inflationary pressures have subsided and that the Fed could start slowing down on its tightening policy some. This alone is not what is sinking the buck, but there is the belief that we know what is to come from the Fed, so any other global developments can easily boost the value of other peers.Over the weekend, reports around the world started mentioning the possibility of a Ukrainian victory over Russian invading forces as they are forced to take a step back while the territory is being taken back. If indeed if the conflict can have a positive outcome, whether it relates to a cease-fire or negotiations to eventually end the conflict, we should expect a major tumbling for the buck. Any relief from the effects of a prolonged energy crisis will be bad news for the greenback moving forward.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The Euro jumped up to its best level in three weeks, getting rid of the negativity that plagued it all of last week. While the European Central Bank acted, the energy crisis has cemented a potential recession in the minds of markets that has translated into the weakest shared currency since the early years of inception.
The swings continue as now the likelihood of more 75-basis-point increments to interest rates revives the value of the currency, but we need to see how consistent the outpouring of positive items will be as we enter the last part of the year. We will get a look at July’s Industrial Production Wednesday and Consumer Price Index on Friday. We are eager to see if news of the conflict going Ukraine’s way dramatically shifts the Euro narrative.
GBP ⇑
Sterling also rose a bit based on the news this weekend supporting the possibility of Ukraine sending invading troops out of their territory. The latest geopolitical break comes at a time of major transition as the U.K. debuts a Prime Minister following the passing of the Queen of England, Elizabeth II.
While it is not entirely clear what Liz Truss’s administration will be like, the economic pressures of a botched Brexit and post-pandemic need will make for a lot of work ahead, not just with her own party. Monthly GDP figures revealed slightly less growth than expected at 0.2% vs. 0.3% estimated. For any signs of trouble, we believe Pound will be very sensitive and has room to fall.
