The euro flattened out early gains as the Pound dropped a penny on Brexit uncertainty at 8:30 am CT. While the pressure bled into the Euro, we do find this move a bit more technical than fundamental. The paring also occurred when ECB President Mario Draghi began speaking; he was upbeat on the economy and the positive effects of quantitative easing.
After a strong start to this week’s trade, the U.S. dollar is on the back foot on the final trading day of the week, month, and quarter. The proximate cause for the buck’s weakness is good news overseas: specifically, the EU countries reached an agreement on migration, while the UK’s Q1 GDP was revised up by 10 basis points to 0.2% quarter-over-quarter.
The U.S. dollar remains among the strongest of currencies out there. Not only is it finding support from safe-haven flows amid the current stock market weakness, but it is also in demand due to the growing disparity between monetary policies in the U.S. against other major economies.
All eyes are on the Turkish Lira this morning with the currency rallying sharply in early trade today, following the news that Turkish President Recep Tayyip Erdogan has won the weekend election in Turkey. The Lira had advanced as much as 3% at time of writing with the currency currently standing as the only emerging market to be trading higher against the U.S. dollar.
The G7 Summit comes into focus to finish out the week. One week after announcing tariffs on the EU, Canada and Mexico, President Trump will meet with leaders from Canada, France, Germany, Italy, Japan, the UK and the European Union. Tensions are due to run high, which also means the market’s low expectations should not create any surprise currency moves.
Ahead of next week’s major central bank meetings and key data releases, there have been some interesting moves in the markets with the euro/U.S. dollar currency pair in particular showing relative strength. Although the Federal Reserve is almost certain to raise interest rates next week, it is the European Central Bank which all of a sudden is looking to be the more anticipated meeting.
As jitters over Italy’s political situation calmed down yesterday, risk-sensitive assets rallied across the board. Haven bonds and the yen fell, while stocks rose sharply amid hopes that fresh elections may be avoided.