U.S. Dollar Dominant as Markets Tumble on Pessimism
JULY 19, 2021
The U.S. Dollar rallied against its peers across the board based on renewed doubts about the globe’s ability to continue seeing economic growth for the remainder of the year.
Indeed, the buck and the Japanese Dollar are advancing as safe-havens in the midst of fears that the best of the recovery has already passed us.
More worrisome, traders are seeing the new COVID resurgence as a major dysfunction since it is already forcing safety measures and restrictions in some areas of the country and certainly all over the globe. Petro-currencies and commodity-based tender suffering at the moment after oil prices declined as a result of an OPEC+ deal to actually increase production.
Although there was good data in terms of Retail Sales last week, Consumer Sentiment dropped as consumers worry about inflation and declining conditions for big-ticket purchases. Treasury yields are also going down as inflation concerns fade and market gauge whether central banks and governments can get away from providing aid to the economy monetarily or fiscally any time soon. It seems unlikely at the moment, thus this significant move in the dollar’s favor.
What to Watch Today…
- No major economic events are scheduled for today
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The Euro lost ground as markets await commitment from European Central bankers on Thursday that the environment will be easy for another year or longer. President Christine Lagarde has been adamant about the need to keep easing going for a while and has even received the blessing from the German Bundesbank, which pre-COVID was asking the ECB to be more conscientious of the damage ultra-low interest rates was doing to savers.
The ECB is handling a delicate situation well as governments realize the need to spend and distribute the funds agreed to on the big rescue package last Summer, plus the potential for having to do more as infections remain a thorn on the side of fully re-opening and lifting restrictions. Lowest rates since the start of April against the greenback.
The Canadian Dollar is losing ground and is now trading at its weakest point since February 5th based on the dovish markets and shock to oil supplies post-OPEC+. Most certainly, the “Loonie” has benefitted from the recovery increasing the demand for oil and previously agreed on production cuts among their members. The pact over the weekend adds 400K barrels more per week, uninterrupted until late September.
Part of the reason for increasing productivity was diplomatic in order to appease tensions between the UAE and Saudi Arabia, involved in some of the armed conflicts afflicting the Gulf, particularly Yemen. We shall see how much room the “loonie” has to lose, but today is definitely a day for the safe-haven buck as markets all dwindle.
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