Tag: EUR

Country, Economy

Parliament Attack, Robo-Adviser, Le Pen, Bear Greenbacks… What is the World coming to?

Parliament Attack, Robo-Adviser, Le Pen, Bear Greenbacks…

What is the World coming to?

Breaking from our normal MosaicaFX news article model, we thought we would touch on a few different subjects in this submission.  It seems like so much is happening almost simultaneously anymore that we may occasionally need to combine multiple subjects since they all end up in the same place.

Specifically, it seems like nearly every day some type of “headline” is screaming for our attention to try and either scare us into a “knee-jerk reaction,” or paralyze us with fear.

More than a portion of the articles we read today will never impact our lives or our businesses due to them focusing on unlikely scenarios or outcomes.  While other articles may contain interesting and even important information that our knowledge of, could indeed be important.

The bottom line though is that we need to adjust our “input-filters,” to handle and prioritize the extreme amounts of data and information we are inundated with in this era of instant reporting.  Below are some subjects that are from both ends of the information spectrum.  The only thing we know for sure about them is that they will undoubtedly result in currency and economy fluctuations in the global marketplace.

Parliament Attack

Wednesday, March 22, 2017 – some type of attack occurred at the House of Commons in Westminster London.  At least four people were killed and more people were injured, some of them gravely.  The Prime Minister was evacuated from the Parliament grounds during the attack.  No word as of yet if this was a terrorist attack…although the early indications are that it was.

Outcome:   Our prayers and best wishes for these innocent victims and their families are of course with them.  From a business standpoint, we can only imagine that this attack will have some type of negative effect on the GBP currency in the short term.  Is such an anticipated negative effect on the UK’s currency logical?  Not really.  However, logic does correlate with many currency or economic outcomes as of late.  Sometimes it appears as though the market reacts only because it thinks it is supposed to do so.

Robo-Advisor

Goldman Sachs is developing a robo-advisor for the financial markets.  This platform would be software based to provide mass-affluent clients, “…detailed information on their financial portfolio and analytics,” as noted in Bloomberg.  The digital project will, “…cover mass affluent markets by building an Automated Digital Advice Platform (Robo Advisor.)”  This news came after Merrill Lynch launched its own robo based advisor in February.

Outcome:  Evidently we are moving towards a world where taking the time to actually speak to a client who may have millions of dollars invested with you is no longer worth the effort.  Goldman Sachs private wealth unit targets clients with at least $50 Million in assets so we can only surmise that the future will mean that to qualify for a live human being to answer your questions…you will need more than $50 Million in assets.  To be fair, Goldman Sachs has been attempting to drive a more “mass-market” oriented approach to client growth lately.  Perhaps, this will pair with that approach.

Le Pen

Just as in the recent U.S. national election, the polls in France are all over the place.  Official surveys forecast that while the candidate may squeak by a win in the primary, she will be trounced in a general election.  However, new “secret polls” claim the National Front candidate is actually far more popular with voters than the official surveys forecast!  What?!  The polls are not in agreement with each other?  Official polls from major media houses seem to indicate that the establishment candidates are poised to win the election….but secret polls are indicating that the far-right, nationalist agenda candidate may be unstoppable at this point.

Outcome:  Marine Le Pen may have the backing of more than 30% of the voters ahead of the presidential elections in late April and May, according to these hidden surveys.  Terrorism and EU globalist driven policies are not setting well with the French people.  If this candidate is in fact elected to the highest office in France, it will no doubt roil the EU in general while possibly strengthening the U.S. Dollar and GBP.  What may be good for France may cause reverberations felt throughout the EU and beyond.

Bearish Greenback

The U.S. Dollar is still working its way through a technical correction to the downside after last week’s lukewarm endorsements of the Dollar by the Fed after announcing their latest rate increase.  Considering the concerns over the labor market’s background disappointments (Payless Shoes soon to be filing for bankruptcy and Sear’s announced floundering… as examples) not only wages but even the Congress struggling to develop the Administration’s promised tax cuts in a timely fashion… has forced the Greenback to erase all of its post-election gains.

Outcome:  If the U.S. Dollar continues to slide due to weak payroll and employment concerns coupled with apparent Congress infighting, it is expected that this “correction” in value may not be a completely bad thing.  It is possible it will provide a clean slate for the Dollar as the year moves forward.  General expectations from most currency experts indicates that the Greenback may remain flat or slip a bit more until a foundation for stabilization is in place.

The Bottom Line….

There is a lot of things happening in the world today no doubt.  As currencies and economies are more dependent upon each other than ever before, this is the time to rely on experts and trusted advisors to support your business ventures.  If is for these reasons that MosaicaFX is contacted by new clients literally every day who are interested in working with us.  Now is the time for you to consider who you plan on relying on for 2017 and beyond.  Now is not the time to face these uncertain days alone.

 

Business, Economy

The U.S. Dollar vs. Roulette

The U.S. Dollar vs. Roulette

Once again we are in a not-so-unique spot when it comes to the value of the U.S. dollar against a basket of currencies it normally trades against.  As the currency trading market has continually proven, we are in for a particularly volatile ride during the next few months.

Many economists have suggested that at least through most of the second quarter, there are several casino games that may be easier to predict the outcomes of as opposed to the value of the Greenback….as well as the Euro, GBP and Yen.

This past week saw the Fed again raise interest rates a modest amount.  As a result, the U.S dollar slipped again in value.  In fact, most currencies improved against the U.S. dollar…including the peso!  Most currency experts believe that when the peso reflects improvement against the almighty Greenback, the dollar is definitely weakening.

U.S. Economy Confidence Still Strong

While no one was surprised by the Fed’s decision to hike interest rates 25 basis points, the market was caught off guard by the Fed’s less overt guidance it chose not to provide regarding the anticipated trajectory of the U.S. economy.  Chairman Yellen was quite clear that the Fed did not wish to “move rapidly,” in its staving off potential inflation concerns in the coming months.

In fact, Yellen and the Fed underscored that the pace of rate normalization would remain “gradual,” at best.  The immediate result of this lackluster statement was for the U.S. dollar to slide, bond yields to drop and stocks to rise.

Simultaneously, U.S. Treasury Secretary Steven Mnuchin made it very clear that the importance of the long-term dollar strength to the U.S. economy and to its role as the world’s reserve currency could not be taken lightly.  While he admitted the short-term strength of the dollar could cause certain issues, he said that in the long-term, “…the strengthening of the dollar is a good thing and should be anticipated.”

Speaking of the Peso…

As pointed out by Wilson Sy, many economists believe that when the currency markets reflect a sort of “regurgitated flux,” they revert or trend back towards their long-term mean values.  In fact, if you look back over 10-year periods you will see these trends reflect a less ominous trajectory…by and large and with exception.

Let’s take a look at the peso in that regards.  The Mexican Peso is still significantly ahead of the regional average.  While many are concerned about the recent weakness of the peso, it is not necessarily a bad trend.  In fact, it appears that the peso is simply reverting back to the mean as it seeks its appropriate value.

A weaker peso also brings certain advantages with it:

  • Export Stimulation – a weaker peso makes exports cheaper.
  • Domestic Manufacturing is Promoted – as imports become more expense, domestic products can more easily compete.
  • Benefits Agriculture – as imports become more expense, domestic food sources can more easily compete.
  • Tourism is Boosted – as tourists get more bang for their buck, they travel to Mexico for vacation destinations.
  • Promotes Countryside Development – more pesos stay “home” so they help to develop domestic growth through internal currency support.

Of course, a weak peso can also cause higher energy costs, higher inflation and increased foreign debt obligations for the government.  Again though, a reverting to the long-term mean for the peso should be anticipated and therefore a minimal market or economy “shock” should be expected.

The next 90 Days…

Since last Thursdays rate hike, a typical divestiture of Dollars took place.  This should have been anticipated and in fact….was anticipated by most experienced traders.  The Dollar has pulled back and looks poised for a consolidation or a correction.

In the longer term, it appears there may be signs the Euro and Yen are stabilizing against the Greenback somewhat.  As inflation begins to ratchet up slightly and growth in the economy appears to become more consistent for the EU, Japan and the U.S., the U.S. Dollar may find itself having to work harder to not slip further.

On the other hand, the house edge in the casino game Roulette is 5.26% over the player… at this point those may not be such bad odds after all!

 

Business, Economy

Pound Floats Higher Against the Euro!

Pound Floats Higher Against the Euro!

This week United Kingdom Chancellor Philip Hammond delivered his first Budget to the UK government for review.  Almost immediately as he began his remarks outlining his intentions both in the near term and long term for the UK economy…..the Pound began to soar against the Euro!

The Pound was tethered at a low of 1.1497 just an hour before the Chancellor began his remarks and yet as his speech about the new Budget continued, the Pound rose to 1.1542 against the Euro.

While the Pound mitigated its rise somewhat as the Leader of the Opposition party Jeremy Corbyn began his assessment of the Chancellors remarks……it still only dipped back to 1.1536.  An overall buoyant response to Chancellor Hammonds budget address.

The High Points…

There were several main points that supported the positive trajectory of the Pound during the release of the Ruling Party’s Budget.

The “theme” of the budget and its supportive remarks by the Chancellor is, “….building the foundations of a stronger, fairer, more global Britain.”  However, don’t be deceived by the reference to a “…more global Britain.”  This is a direct reference to Britain requiring a more equitable treatment from not just its European neighbors but from other trading partners around the world.

As this is one of the major themes also resonating with the populace after the Brexit vote, the Chancellor seems to be supporting these ideas as “…what is good for Britain….is also good for the world,” as opposed to a reverse of that order during the past decade or more.

The Chancellor expressed the expectation for stronger growth figures over the next year of 2% with continual similar growth over the next five years.

Inflation is expected to rise by 2.4% for 2017 but is predicted to fall to 2.3% for 2018 and then to level out around 2% for 2019 and 2020.

Borrowing also was revised lower for the years following 2017 with Mr. Hammond promising to not “saddle our children,” with exurbanite debt in the years to come.  In fact, the Chancellor indicated debt levels were due to fall from 86.8% this year to 79.8% by 2021.

The Pound Floats across the Pond….

While the Chancellors speech helped to float the Pound higher against the Euro, not surprisingly it also buoyed the GPB against the U.S. dollar.

Prior to Mr. Hammond’s budget address the Pound was trading against the Greenback at $1.2140.  However, after the Chancellor began his speech the currency trading rate went to $1.2182….dipping slightly to $1.2175 as the day dragged on.

The upward trends recognized by the UK currency when trading against both the Euro and the U.S. dollar is a dramatic contrast to trading levels seen before the release of the Ruling Party’s Budget and the Chancellor’s address explaining the governments budgetary plans to support it.

While the Pound will most likely remain in a stable and similar position against the Euro in the coming weeks, its trading rate against the Greenback is less certain.

Will the Union Jack Continue to Wave?

If the Fed chooses to implement a rate increase in the next week, this will no doubt impact the Pound rate trading against the U.S. dollar….as it will surely impact a basket of currencies as well.  Just as several monetary and fiscal policies in the UK as it engineers its Brexit structural advancements will also impact the Pound.

As Xtrade analyst Paul Sirani has pointed out, “…While today has sparked a flood of confidence behind the Pound, the UK economy has a few more hurdles to jump as it begins to withdraw from the single market.” 

It is specifically due to reasons like these that it is imperative that companies relying on accurate foreign currency trading forecasts partner with advanced development currency managers such as MosaicaFX. Don’t leave your profits to chance.  Focus on your business and let us focus on your currency profits.

Contact us today and let us explain how we will help you.