The US dollar is up for the fourth day in a row, albeit fairly mild moves. Against the big majors it is pretty much flat, but it is up nearly 1% against the more commodity-sensitive currencies like the Australian and New Zealand dollars and the Mexican peso. Equities around the world are back on the weak foot this morning. The S&P 500 is notably off more than 2% at the New York open. US dollar strength in such a risk-off environment makes sense. Data-wise, Germany’s IFO confidence index improved in line with expectations; however, expectations are muted these days as Europe is debating lockdowns, with one article out today calling Europe’s new restrictions “lockdown lite”, which focuses on individual outbreaks rather than broad measures that most of the world went through at the beginning of this whole thing. On the US side, this week’s initial jobless claims rose by 4K to 870K, which is a disappointing result compared to market expectations of 840K. Globally, all economies feel like they are in a start-stop mode like we discussed yesterday. Today, it is the US’s turn to be the one to disappoint. Two central banks – the Swiss National Bank (SNB) and Norway’s Norges Bank – met and left rates unchanged as widely expected. The SNB’s deposit rate and Libor target is -0.75% while the Norges Bank is sticking with a zero target rate. Both banks continue to emphasize accommodative monetary policy. Looking at currencies from a slightly broader lens, over the last five business days, we have seen a gradual but persistent decline in the Mexican peso (nearly 8%), Brazilian real (6.4%) and the South African rand (5.7%). Like I alluded to at the beginning of this commentary, the currencies that seem to be most at risk are those more tied to commodity price action. This continues to be a barometer of the global economy, with consumer demand still weak overall. In watching these currencies this week, it dawned on me that I have not had South Africa as a topic for Global Perspectives in years. Such will be our topic for the video, which comes out tomorrow morning. | |
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