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USD Recovers, Euro Suffers from Political Uncertainty

Published February 6, 2017
  • The US dollar bounced back from last week’s sluggishness as investors considered how the high growth in new jobs will affect the FOMC’s interest rate hike schedule this year
  • Modest pace of wage growth and a slight increase in unemployment had kept the US dollar down on Friday; rate hike odds for June now sit near 50%
  • Both USD/CAD and the US Dollar Index are up this morning; the Canadian dollar is a relative outperformer due to higher oil futures
  • The euro is down against both USD and CAD as the French presidential election looks to cause increasing political uncertainty for the euro zone
  • The far-right presidential candidate, Marine Le Pen, unveiled a plan to take France out of the euro; Le Pen is known for her anti-globalist, anti-EU and populist platform in the current election
  • Le Pen’s main challenger, Francois Fillon from France’s Les Republicans, is under increasing pressure to withdraw from the election due to a scandal involving his wife misusing state funds
  • German factory orders rose more than expected month-on-month in the biggest increase since July 2014; ECB President Mario Draghi will speak later this morning at 9:00 AM EST
  • The price of oil has become more volatile after the US imposed fresh sanctions on some Iranian companies, days after President Trump put Tehran on notice; Iran’s future oil exporting capabilities are now in jeopardy
  • The Baker Hughes rig count showed that number of rigs drilling for oil in the US increased by 17 last week, the 13th gain in 14 weeks; this increased production is holding oil prices in the $50-$60 range

Chart (1) German Factory Orders Since 2012