The U.S. Dollar is trading in slightly weaker ranges as counterparts mounted a bit of self-correction recovery following days of non-stop greenback strengthening.
USD
The U.S. Dollar is trading in slightly weaker ranges as counterparts mounted a bit of self-correction recovery following days of non-stop greenback strengthening. However, the buck is likely to hold on to its recent gains and perhaps see a bit of resurgence as Gross Domestic Product growth for the second quarter was upgraded to 3.1% from 3.0% after its third revision.
Confidence in the economy may seem to be priced-in by traders, as the dollar is not climbing yet, but at least the figures confirm that the Fed can indeed feel confident about ongoing progress and increase borrowing costs. This development in turn will prevent the dollar from sinking as a result of economic performance divergence with the Euro-zone.
There will be some Fed officials slated to speak at various events in the next two days, but we are confident that Yellen’s take were enough to stave off any dissidence when it comes to the ability to hike. The rest of the week will take on different headlines and see the release of Personal Income and Consumer Sentiment numbers, which could potentially aid the dollar’s appreciation.
EUR
The Euro remains around its weakest level in a month following a bit of profit-taking on USD positions that pushed the shared currency slightly higher. Worries over German congressional coalition building remain, but some other curve balls are coming the way of the EU. Spain, one of the more problematic economies, the fourth largest, and which has seen vast improvements is now under pressure politically stemming from a controversial Sunday referendum in the region of Catalunya, where Barcelona is seated and 7.3 million people reside.
The vote, considered an illegal maneuver by the Spanish government, asks the citizens of this unique region, with its own language and culture, if they would like to declare independence from Spain. This political turmoil started as a minor show of pride after the financial crisis revived thought among Catalunyans that perhaps the region would be better off on its own.
Historically, Spain is a formation of regions that the King slowly unified throughout centuries, but just like the Basque, Catalunyans have felt oppressed during different periods of Spanish history, particularly the Franco dictatorship of 1935-1975. The Spanish government has been criticized for reacting violently in recent times to the once symbolic calls for Catalunya independence and many believe that the vote adds to anxiety in Europe over separatist movements that threaten the European Union and its currency. Not all is well anymore in the European theater.
JPY
The Yen fell this week to its lowest point in two months as markets have flourished and investors shrugged off the nuclear rhetoric from North Korea, thus ignoring the safe-havens. Nevertheless, the Yen could mount a major comeback as confidence in the economy grows and Prime Minister Shinzo Abe looks to consolidate power through a snap election.
The votes are scheduled for October 22nd and Abe already succeeded by dissolving the Japanese parliament, as his main opposition, the Democratic Party, has effectively disbanded. Abe power and progress over handling the North Korean situation may bode well for the Yen as we close the month.
