Tag: Dollar

Business, Ecommerce, Economy

A Penny for Your Thoughts?

A Penny for Your Thoughts?

Over the last five days our MosaicaFX research team has read dozens of domestic and international articles regarding the economy, foreign exchange rates, currency values, e-commerce and developmental interest rate models.  What have we discovered?  Even among the so called experts…their…is…no…consensus.

Let’s take the U.S. Dollar for example.  Below are some headlines that ran recently…all on the same day.

  • US Dollar Rebounds Ahead of FOMC
  • The death of the US Dollar rally (as the Loonie rises from the grave)
  • US Dollar Retesting Session Highs
  • The US Dollar is slipping as the Fed begins 2-day meeting
  • US Dollar Rises Against Majors

It is apparent that as trends, graphs, charts and spreadsheets are analyzed that data is still interpreted by people.  When numbers are crunched by software applications and then applied to historical data for comparison…there is still a human element that must be entered into the equation.

The Human Element

The psychology of financial expansion is a term that has been derived from an understanding of how much influence personalities and emotions can exert on domestic economics.  It is accepted that a robust personality at the helm of a corporation can by force of sheer will drive the success (or failure) of that business.  Less accepted, is that same general principle on a macroeconomic scale.

However, many economists believe that it is just such a force of sheer will that has helped to restart the U.S. economy somewhat.  With the election of a devout businessman into the White House, some in the private sector credit President Trump’s overt commitment to supportive business policies that has actually created an enthusiastic endorsement by contributors to the economy.

It is this human element of overt enthusiasm that seems to be buoying the ebbing lows associated with the pitfalls of negative geo-political and global economic news.  In other words, when bad things happen (such as terrorist attacks, natural disasters, financial calamites, etc.) our financial institutions and economies overcome them it seems because the will of the nation requires it.

The Invisible Hand in the Marketplace…

It was Adam Smith who in the 18th century developed a concept to describe the “invisible” forces of the free market.  Smith’s description of the invisible hand theory stated that individuals pursuing their own interests frequently promote the good of society’s interests overall.

Smith more directly stated this theory as, “…It is not from the benevolence of the butcher, the brewer or the baker, that we expect our dinner, but from their regard to their own self-interest.”  He went on to state, “…We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their (personal) advantages.”

Stated another way, the pharmacist doesn’t show up and work long hours mixing prescriptions to heal our bodies out of their love for their fellow man (in general) but because they wish to make a mortgage payment and pay their electric bill.  It is only by them pursuing their own interests that we benefit as well.

The Bottom Line

This is the era of information overload for most people.  The sheer amount of data and information available through the internet, television, radio, e-blasts, magazines, etc. is so voluminous that the average individual cannot process all of it…and if they are able to wade through it, most likely it will be after their window to apply that information has closed.

The skill set that allows you to successfully drive your business is based on your experience and knowledge in the field or industry you have chosen.  Yet you no doubt understand that for you to navigate the dangerous shoals of international business, it is important that you partner with other experts who not only can process numerical data…but can also interpret or feel the human element that impacts the black and white financial market your business depends on.

MosaicaFX prides itself on not just providing you information and our interpretation of what the market is headed for…but we do something that most foreign exchange companies forget to do.  We ask our clients what they want out of our partnership.

Our goal is to learn what our client’s needs are and then anticipate what their business model will need from us so they can be successful.  MosaicaFX has Executive Account Managers that will work to protect your profits through state-of-the-art hedging strategies and we will never forget to ask the important questions.

A penny for your thoughts?

 

 

Business, Economy

The GBP, Dollar & Euro… Chicken Bones and Crystal Balls

The GBP, Dollar & Euro…

Chicken Bones and Crystal Balls

There are a lot of things happening over the next couple of weeks with regards to the GBP, U.S. Dollar and Euro.  These currencies all have tremendous pressure being placed on them for a variety of external reasons.

While the Dollar is dealing with primarily economic data…the GBP and Euro are being impacted by stresses that are more of a political nature.  Therefore while the Greenback may be dealing with multiple data point adjustments over the next week or two, the GBP and Euro may be in for a rough ride for a bit longer.

No economist or currency managers are able to forecast with 100% certainty, although it is to be expected that they are somewhat better than fortune tellers who use crystal balls or chicken bones and voodoo spells.

Having said that, we at MosiacaFX pride ourselves on using the most up-to-date analytical data and experienced foreign currency managers available to interpret and predict future currency trajectories.  We are committed to providing our clients the best account support possible.  Let us prove to you today our resolve to protect your profits.

GBP

This week marks the beginning of the halfway point in the second quarter of the year.  In the UK, we can now expect updated data from the UK Purchasing Manager Surveys or PMI for Manufacturing, Services and Construction.  This up-to-date data will provide an overview of how the UK economy performed for April.

Conventional wisdom is forecasting that Manufacturing may slip by two basis points to 54.0 while Construction will also slip by two basis points to 52.0.  The Services survey will be published on May 4th and it is expected to fall from 55.0 to 54.5.

Markets will no doubt be watching to see whether these bearish trends continue with the PMI’s. On balance, TD Securities believes, “…markets are looking for a bit of a pull-back in the PMI’s, and we’re (just) modestly optimistic in a review of the weeks ahead.”  At present, we doubt that disappointment will feed into any sustained pressure on Sterling through as the currency appears to be more concerned with global investor dynamics and current UK domestic politics.

Dollar

The markets are anticipating the meeting this Wednesday of the FOMC (Federal Open Market Committee followed up this Friday with the Non-Farm Payrolls report.  As recent GDP data for Q1 was disappointing to the same the least and a low Payroll expansion of (98K) for March was also considered negative…the question of 2017 sustainability for the growth of the U.S. economy is now considered truly “concerning.”

When the Federal Reserve holds its next meeting in June, a great deal of interest (as usual) will be riding on the level of confidence they place in the U.S. economy through the generally “couched” language they publish.  Such language will no doubt weigh heavily on the Dollar. While expectations have been for the Fed to announce an increase in interest rates at that meeting, analysts now fear that recent data reflecting the aforementioned poor data may bring those assumptions into question.

Not all economic analysts are on board with those assessments however.  “While it is true that if the FOMC report lowers expectations for the economy, the result could be a weaker Dollar…it is also true that the Q1 GDP “miss” was possibly due to “transitory or seasonal,” effects more than it was based on real economic decline,”…according to Barclay’s Capital.

Current consensus estimates for April are that they will have a better showing than March as far as payroll expansion goes.  Specifically, TD Securities expects a 165K and Barcap forecasts a 225K expansion with an average of approximately 195K ….providing the “chicken bones and voodoo incantations,” are accurate.

Euro

As any foreign currency trader is aware, the future of the Euro is in flux while it awaits the outcome of the second round of the French elections.  While the main supporter of the European Union, Emmanuel Macron, has been leading in all of the current polls, the nationalist candidate Marine Le Pen, seems to be fast closing the gap.  In actuality, it may be that Macron has slipped as much as Le Pen has risen now making for a much more competitive race.

Conventional wisdom currently holds that this is not just an election for the Chief Executive’s Office of France, but it may also be a vote for the future of the European Union itself.  If Le Pen wins, “Frexit,” may be the next “hit,” the EU takes.  For this reason, the Euro has been softening a bit as markets are exercising caution ahead of the upcoming election.

Overall however, it is safe to say that the Euro is basically treading water ahead of the May 7th elections.  The markets appear to have priced into the current currency values a win by Macron.  Despite a lack of policy adjustments by the European Central Bank during their latest meeting, most stabilization of the Euro (including the aforementioned micro-softening of its value) are simply the “angst,” reflected in the currency markets due to the politics of France.  It is safe to say that much will be answered on the morning of May 8th.  Either the Euro will strengthen…or it may roil with a Le Pen surprise win.

MosaicaFX

As we opened this article, now is the time to partner with a currency manager that relies on more than voodoo to protect your profits.  Don’t allow yourself to be overwhelmed by the many different market gyrations that are under way.

It is fair to say that unless you do what we do everyday….there is no practical way to gather and analyze the vast amounts of market and currency data we work with on a daily basis.  That is why we would welcome the chance to work with and be honored to have you as our client.

 

 

 

Business, Economy3 Comments

The U.S. Dollars Hit A 13-Year High. Let’s Talk About Why

The U.S. Dollars Hit A 13-Year High.

Let’s Talk About Why (And Where It’s Going)

Doesn’t it seem as if every place you look, there is talk about the U.S. dollar and what is in store for it?  Let’s face it; the Presidential election last week has made a “yuuuge” impact on the value of the U.S. dollar, and in turn the value of numerous currencies traded against the almighty greenback.

Given the sharp upward trajectory of the U.S. dollar over the last week, the first question on everyone’s mind is: Can we expect some type of “correction” in the coming weeks?  Conventional wisdom says that a correction is likely; however, reports indicate that it will probably be a shallow one.  Most economists believe that Trump’s unexpected win was a game changer for the U.S. dollar and that gains are here to stay.

What is the explanation for such an aggressive uptick in the U.S. dollar?  Was Trump’s election enough on its own to merit to account for this surge? The answer is quite possibly, yes.  Trump has made no secret that he plans to enact a tremendous spending program to address the crumbling infrastructure in the United States.

This approach will address several constructs on multiple fronts.  Such action would be a long-term investment in critical programs that would ensure our transportation needs are met for decades to come.  This would include highways, tunnels, airports, heavy and light rail service and bridges, all of which need repairs and improvements. This effort would also act as a jobs program that would help to provide long-term, high-paying incomes to Americans in need of such work.

The next most common question about the future of the Dollar is: Can we expect it to remain strong for the foreseeable future?  It is expected that the prospect of a December rate hike by the Fed will keep the U.S. dollar going.  When you consider that U.S. stocks have hit record highs in the last week, one would expect that if that bullish trend continues; it will provide the Federal Reserve even more leeway to raise interest rates.  This will also be the last chance for Janet Yellen to hike the rates before a new Trump Administration takes over.

The cumulative effect of these actions taken together is a strong indicator that the direction of the U.S. dollar will continue.  The Trump ascendency to the Presidency and his plans for infrastructure spending, the bullish trajectory of the U.S. Stock Market, ongoing signals from the Fed and Chairman Yellen that an interest rate hike is in the offing… all are reasons (barring some unforeseen calamity) we can expect the U.S. dollar to remain strong for the near future.

Taken as a whole, the market is banking on a rate hike with Fed fund futures pricing in an 84% chance of tightening taking place.  The focus this week will be on today’s testimony by Yellen before the Joint Economic Committee.  She is almost certainly going to reiterate her view that rates should rise next month which would completely validate the U.S. dollar’s ongoing rally… and potentially send it to new highs.

The bottom line: The gains for the U.S. dollar are not a fluke.  They are a reaction to several fluid positions that have been placed in motion by the electorate and the Federal Reserve.  Smart money is that once this train has left the station, it will most likely continue on for some time.

Please Note:  Mosaica FX LLC is not a financial services company that provides investment analysis or recommendations.  We are simply providing a compilation of data points as recognized and distributed by various economic providers.