As the overall markets are in a proverbial holding pattern in anticipation of the impending figures on labor and economic conditions, traders are closely watching the currency environment, as the strength of the USD is impacting global currency pairs, commodity prices and the treasury markets.
The Euro found itself under renewed selling pressure during trading on Monday following reports of former Prime Minister Alain Juppe confirming that he was not ready to run in the French presidential election. Markets simply acknowledged this fresh development as potentially heightening the chances of Marine Le Pen winning the elections which consequently exposed the Euro to further downside losses on Tuesday.
Brexit-fuelled anxieties have exposed Sterling to sharp losses this week with sellers exploiting the rising uncertainty to attack the GBP/USD currency pair to a fresh six-week low at 1.2260 during trading on Thursday. Sentiment is turning increasingly bearish towards the Pound and the terrible combination of soft domestic economic data from the UK coupled with political risk could ensure the currency remains pressured.
World stocks fell on Monday, after two huge European merger and acquisition deals fell through and billionaire U.S. investor Warren Buffett warned that while stocks are cheap, they are currently unpredictable and prone to a sudden, steep correction.
The renewed optimism over global economic growth has rekindled investors’ risk sentiment, resulting in global equities lurching to all-time highs this week. Asian markets were firmly bullish during trading on Wednesday with the risk-on trading mood encouraging participants to propel European markets to uncharted territories. Wall Street may be set to benefit further from the heightened speculations of tax cuts and deregulations boosting U.S. economic growth.
European stocks rose on Monday, with gains in telecoms and banks offsetting a big fall in Unilever, while the dollar dipped as uncertainty over politics and the timing of a U.S. interest rate rise kept investors nervous.
The increasing levels of volatility the Greenback has dished out this month continues to highlight how the currency remains entangled in a fierce tug of war between the Fed hawks and President Trump. Although it may be clear that Trump may want a weaker dollar to help U.S. exports become competitive on the global markets, the heightened expectations of a proposed expansionary fiscal plan which will be supportive of US growth may uplift the Greenback.