In the United States, Donald Trump once again accuses Europe and China of manipulating their currencies while criticizing the Federal Reserve for not using the same methods in terms of monetary easing. "If the FED lowered interest rates, we would be like a rocket," he said in a language in line with the character.
A monetary boost from the US central bank at the end of July - i.e. a quarter point drop in the cost of money - no longer seems to be in doubt. However, investors are wondering about the institution's medium-term plans. In this sense, the latest monthly employment report, which is rather solid, does not advocate a cycle of several consecutive actions. Uncle Sam created 224k jobs in June, compared to an expected 160k, while labor market participation increased.
In Europe, the announcement of the probable accession of Christine Lagarde to the head of the ECB in October did not have a significant impact on prices. Lagarde, who has just left her position as IMF Director, should indeed remain in line with the current accommodative Frankfurt policy.
Politically, the situation is easing in Italy after the government reported a deficit target of close to 2% of GDP in 2019, compared to the previous target of +2.4%. On the other hand, the macroeconomy is still faltering in the region after a further disillusionment for the German manufacturing sector. Industrial orders stumbled in May in Germany (-2.2%), below economists' expectations.
In the United Kingdom, Boris Johnson still has a very large lead in the race for 10 Downing Street against his ultimate opponent Jeremy Hunt. Theresa May's successor will be announced on July 23.
In Mexico, moderate Finance Minister Carlos Urzua slammed the door, denouncing the "extremist" shift in his country's current economic policy.
This week Forex traders have been watching Jerome Powell's hearing in Congress on Wednesday and Thursday in search of clues as to the US central bank's strategy for the rest of the year. Finally, Thursday and Friday will be announced the US inflation figures for June (CPI and PPI respectively).
Graphically, the Euro remains in a downward pressure despite the expectation of a rate cut on the other side of the Atlantic. Under 1.1238, the single currency opened the way to more momentum with 1.1130 in sight. However, we prefer rebound sales.
The Pound continues its downward slide, falling below USD 1.25 and trading at its lowest levels since January 3. The EUR/GBP also crosses 0.90 for the first time since January 11 and a relief for the British currency may be in order.
The USD/JPY pair continues its rebound against a backdrop of a truce in the trade dispute. After deleting 108.60, the next test is around 109.20. If this threshold is crossed at daily closing, a return to 110.60 would again be a credible scenario.
Finally, the Peso is suffering from the political tensions in Mexico and a rebound of the greenback from MXN 19.4952 could emerge, thus closing the gap that had formed last month after the immigration agreement.