Although it is expected and understood that the UK will be aiming to strengthen relationships around the world following the result of the EU Referendum, I am unsure how people will react to Theresa May strengthening a relationship with the United States that appears on track to isolate itself from globalization.
The strength in the Nikkei can be largely attributed to the exceptional demand for the Japanese Yen last week when investors became concerned over what the upcoming “America first, and always” rhetoric might actually mean for the global economy and financial markets.
The U.S. Dollar Index is back at 100, a pivotal level. What happens here could have important implications for the major forex pairs, especially the Euro/U.S. dollar (EUR/USD) currency pair, at least in the short-term outlook anyway. The latter has been inching higher for the past five weeks now. It has managed to climb from a low of about 1.0340 at the start of the year to a high so far of 1.0770.
The British pound/U.S. dollar (GBP/USD) currency pair initially rose in the immediate aftermath of the Supreme Court’s decision that the parliament must hold a vote on Brexit. This was a predicable outcome. However, sterling then fell sharply as traders responded to news of additional ruling that the UK’s devolved assemblies will not have a vote on Brexit. But just as quickly, the currency then recovered most of its losses to trade near $1.25 again at the time of this writing.
Currency markets are again in the spotlight this morning as continued discussions on Brexit and the impact of the the U.S. dollar on global trade. This months OPEC meeting will certainly provide additional color on productions levels for 2017.