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STOCKS

Equities remain mixed and can dip/consolidate in the near term before we see a fresh leg of rally. Most indices like the Dow, Shanghai, DAX have key supports which can limit the downside and keep the broader uptrend intact.

Dow (26783.49, -22.65, -0.08%) has been inching lower over the last few days, but at a slower pace. The downside is likely to be limited to 26600-26500 due to lack of momentum in the current downmove. As mentioned yesterday, Dow can consolidate between 26500 and 27000 before a fresh rise to 27200-27500 happens.

Contrary to our expectation, DAX (12436.55, -106.96, -0.85%) has declined below 12450. While below 12450 DAX can dip to 12300-12250 after which a bounce is possible.

Nikkei (21542.04, -23.11, -0.11%) is managing to hold above 21500. While above 21500 a sideways consolidation between 21500 and 21750 is possible for some time and a rise to 21700-21750 can be seen in the coming sessions.

Shanghai (2921.88, -6.35, -0.22%) is holding above 2900 and the pace of fall seems to be slowing down. We expect the support at 2900 to hold and Shanghai can 2950-3000 in the coming day.

Sensex (38730.82, +10.25, +0.03%) has recovered from the low of 38435.87 yesterday. An intermediate rise to 39100 can be seen in the near term after which the fall can resume targeting 38000 on the downside in the coming weeks.

Nifty (11555.90, -2.70, -0.02%) fell as expected to 11470 as mentioned yesterday and has bounced from the low of 11461. The support at 11460 is holding well and an intermediate rise to 11600-11650 is possible in the coming sessions. The broader view is bearish for the Nifty to break 11460 and fall to 11400-11300 in the coming weeks.

COMMODITIES

Commodities remain mixed. Gold and Silver are managing to hold above their key supports and can remain range bound in the near term. Copper has declined below a key support and has room to dip further. Oil has moved up and can inch further higher in the coming sessions. The US inventory data release today will need a watch which can influence the oil price direction.

Gold (1393) is managing to hold above 1380 indicating lack of strong sellers. Though the near term view is mixed, while above 1380 a rise to 1410 looks possible in the coming sessions.

Silver (15.05) is facing resistance near 15.15 and can dip to 14.90 in the coming sessions. It can trade in a narrow range between 14.90 and 15.15 for some time.

Copper (2.63) has declined sharply thereby reducing the chances of breaking above 2.69. While below 2.65, the near-term view is now bearish to test 2.60 and 2.58 on the downside.

Brent (64.71) can test its near-term resistance at 65.25. A strong break above it can take it further higher to 66 in the coming sessions.

Nymex WTI (58.65) on the other hand can test 59.30-59.50 and can possibly reverse lower again.

FOREX

Dollar continues to trade strong and can move further higher in the near term. As such the major currencies can continue to trade under pressure. Euro, though holding above 1.12, looks vulnerable for further fall. Dollar-Yen can inch further higher while the Euro-Yen remains mixed within its sideways range. Aussie and Pound have declined sharply in line with our expectation and keeps the bearish view intact. Dollar-Rupee is struggling to breach 68.80. It can dip to 68.30 while below 68.80.

Dollar Index (97.52) has risen above 97.50 and keeps our bullish view intact for a test of 97.80 and 98. Whether the index manages to rise past 98 or not will be key in deciding the next leg of move.

As expected, Euro (1.1206) is hovering around 1.12. An intermediate bounce to 1.1230-1.1250 is possible while above 1.12. But the broader picture remains negative for it to break 1.12 and fall to 1.1150 and 1.11 in the coming days.

Dollar-Yen (108.92) has risen towards 109 as expected and can test 109.20. As mentioned yesterday, a pull-back from 109.20 to 108.80 is possible in the coming sessions before we see further rise to 109.50.

Euro-Yen (122.07) remains stuck in the middle of its 121-123.5 sideways range. Our view remain the same. Within this range, we see higher possibility of the cross moving up to 123-123.5 in the coming sessions.

Aussie (0.6922) has tumbled breaking below the key support level of 0.6950 as expected. It can test 0.6900-0.6880 on the downside. An intermediate bounce to 0.6950 cannot be ruled out from 0.6910 before the pair tests 0.6900-0.6880.

As expected, Pound (1.2450) has declined below 1.25 and keeps our bearish view intact for a test of 1.2350 on the downside.

USDCNY (6.8844) is stuck in between 6.88 and 6.90. While below 6.90 we expect the parit to break 6.88 and fall to 6.86 and 6.85 in the coming days. As mentioned yesterday, broadly the pair can remain range bound between 6.83 and 6.90.

Dollar-Rupee (68.5450) has failed to breach 68.80 decisively and has come-off from a high of 68.83. While below 68.80, a dip to 68.30 is possible in the coming sessions.

INTEREST RATES

The US Treasury yields continue to move higher as the hopes in the markets have come down for aggressive rate cut from the Fed after the strong US jobs data release last week. Market will be watching the Fed Chairman Jerome Powell's testimony today to get any hint on the rate cuts. As mentioned yesterday, the outcome of this event could influence the yield movement going forward.

The US Treasury yields are up across all tenors, 2Yr (1.91%), 5Yr (1.89%), 10Yr (2.08%) and 30Yr (2.55%). The yields have room on the upside and are likely to remain higher. The 5Yr can test 1.92% in the near-term and even 2% in the coming weeks. The 30Yr can test 2.60%.

The German yields were mixed. The 2Yr (-0.75%) was down by 2bps and the 30Yr (0.25%) was up 2bps. The 5Yr (-0.63%) and 10Yr (-0.36%) remained stable. The yields can move up in the near term. The 10Yr can test -0.30% and the 30Yr can move up to 0.30% in the coming days.

As expected the support at 6.55% has halted the fall in the 10Yr GOI (6.5884%) as of now. The yield has bounced slightly yesterday and can move up to 6.65%-6.75% in the near term. While above 6.55% the possibility is high of seeing a rise to 7% in the coming weeks.

Key Highlights

• The US Dollar declined to 1.3037 and recently corrected higher against the Canadian Dollar.
• USD/CAD traded above a bearish trend line with resistance near 1.3080 on the 4-hours chart.
• The NFIB Business Optimism Index declined from 105.0 to 103.3 in June 2019.
• The Bank of Canada is likely to keep interest rates at 1.75% in today’s rate decision.

USDCAD Technical Analysis

After a downside break below 1.3200, the US Dollar declined heavily against the Canadian Dollar. The USD/CAD pair even broke the 1.3160 and 1.3100 support levels to move into a bearish zone.

Looking at the 4-hours chart, the pair settled below the key 1.3160 support plus the 100 simple moving average (red, 4-hours). A new multi-month low was formed near 1.3037 and the pair recently started an upside correction.

It broke the 1.3050 resistance area and the 23.6% Fib retracement level of the downward move from the 1.3229 high to 1.3037 low. Moreover, the pair traded above a bearish trend line with resistance near 1.3080 on the same chart.

Finally, the pair surpassed the 1.3100 resistance and tested the 50% Fib retracement level of the downward move from the 1.3229 high to 1.3037 low.

On the upside, there is a strong resistance waiting near the 1.3160 level and the 100 simple moving average (red, 4-hours). A convincing close above 1.3160 and follow through above the 100 SMA could start a larger recovery towards the 1.3200 and 1.3240 levels.

Conversely, if USD/CAD fails to climb above the 1.3160 resistance, it could slide back towards the 1.3080 or 1.3050 support. Any further losses might open the doors for a test of the 1.3000 handle.

Today, there are two important events lined up – BoC Interest rate decision and FOMC meeting minutes. Both are high risk events and are likely to spark swing moves in EUR/USD, GBP/USD, AUD/USD, USD/JPY, gold price, oil price, USD/CAD and NZD/USD.

Economic Releases to Watch Today

• UK Industrial Production for May 2019 (MoM) – Forecast +1.1%, versus -1.0% previous.
• UK Manufacturing Production for May 2019 (MoM) – Forecast +2.1%, versus -3.9% previous.
• UK Trade Balance non-EU for May 2019 – Forecast £-4.7000B, versus £-4.595B previous.
• BoC Interest Rate Decision – Forecast 1.75%, versus 1.75% previous.
• FOMC Meeting Minutes.

Daily Pivots: (S1) 0.6906; (P) 0.6945; (R1) 0.6968; More...

AUD/USD's strong break of 0.6956 minor support confirmed completion of corrective rebound from 0.6831 at 0.7047. Intraday bias is now on the downside for retesting 0.6831 low next. Break will resume the decline from 0.7295 to 0.6722 low. On the upside, though, break of 0.6994 minor resistance will turn focus back to 0.7047 resistance instead.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Dollar remains the strongest one for the week even though upside momentum is diminishing today. The single most important factor for Dollar's next move is whether Fed would cut interest rate at this month's meeting. A 50bps cut is basically priced out by the markets, but futures still indicate 100% chance of a 25bps cut. Hopefully, markets would finally get a clue from Fed Chair Jerome Powell's semi-annual Congressional testimony. The greenback could be given a strong boost should Powell suggest that a July cut is far from certain.

Staying in the currency markets, Canadian Dollar is also firm today as markets await BoC rate decision. No change is expected and with some solid economic data recently, BoC is given some room to turn more "neutral". Sterling is among the weakest together with Australian Dollar. The Pound could be under much pressure should GDP and production data disappoint.

In Asia, Nikkei is currently down -0.03%. Hong Kong HSI is up 0.42%. China Shanghai SSE is down -0.02%. Singapore Strait Times is up 0.61%. Japan 10-year JGB yield is up 0.009 at -0.131. Overnight, DOW dropped -0.08%. S&P 500 rose 0.12%. NASDAQ rose 0.54%. 10-year yield rose 0.020 to 2.054.

Fed Harker: No immediate need to move interest rate in either direction

Philadelphia Fed President Patrick Harker told WSJ yesterday that "there's no immediate need to move rates in either direction at this point in my view". He noted that the economy "continues to be strong" with "very strong labor market". If the economy was "weakening substantially", he would support a rate cut. But "at this point, I do not see that".

Harker acknowledged that inflation below 2% target is a concern. But he added, "it's one that I don't see as an imminent crisis". Also, he believed "we can give it some time to move back up to 2%.

Additional, he didn't se December rate hike as a "particularly bad move" as it was not significant at that point. For now he thought the "prudent path" was to "hold steady and see how the economy evolves".

US & China trade teams held constructive call, but no miracles yet

Leaders of both US and China trade teams held "constructive" telephone conversations yesterday, as negotiations continued. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin joined the talks. On the Chinese side, there were Vice Premier Liu He and Minister of Commerce Zhong Shan. The call was also confirmed by Chinese Commerce Minister in a brief statement today.

White House economic adviser Larry Kudlow said the talks "went well" and were constructive, but "there are no miracles here". He added, "there was headway last winter and spring, then it stopped. Hopefully we can pick up where we left off, but I don't know that yet."

Kudlow also said yesterday that "President Xi is expected, we hope in return for our accommodations, to move immediately, quickly, while the talks are going on, on the agriculture (purchases)." However, it's also reported by Hong Kong South China Morning Post that Xi had made no specific commitment regarding the purchases during the meeting with Trump at G20 in Osaka. So far, no significant increase in purchase is noted yet.

Australia consumer confidence dropped sharply despite RBA rate cuts

Australia Westpac Consumer Confidence dropped sharply by -4.1% to 96.5 in July, hitting a two year low. The deterioration came as a surprise as confidence was not supported by recent positive developments, including RBA's rate cuts and easing US-China trade tensions.

Deepening concerns over Australian economic outlook were the main drivers in decreasing confidence. Expectations in economic conditions for the next 12 months dropped -12.3 to 87.1. That's the lowest level in four years. For the next 5 years, expectations index dropped -6.7 to 91.6.

After two rate cuts in June and July, Westpac expects RBA to stand pat at next meeting on August 6. Updated economic projections to be released then would give the best guide to how the RBA sees the case for further policy action. Westpac expects a further 25bps cut most likely coinciding with a downgrade to the Bank's growth and inflation forecasts in November. Though, it said "the timing of this next move remains highly uncertain".

Also released, Japan domestic CGPI dropped -0.1% yoy in June versus expectation of 0.4% yoy. China CPI was unchanged at 2.7% yoy in June. PPI slowed to 0.0% yoy.

Looking ahead

UK data will take center stage in European session, with GDP, productions and trade balance featured. BoC is widely expected to keep interest rate unchanged at 1.75%. Fed Chair Jerome Powell's semi annual Congressional testimony and FOMC minutes will be closely watched.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.6906; (P) 0.6945; (R1) 0.6968; More...

AUD/USD's strong break of 0.6956 minor support confirmed completion of corrective rebound from 0.6831 at 0.7047. Intraday bias is now on the downside for retesting 0.6831 low next. Break will resume the decline from 0.7295 to 0.6722 low. On the upside, though, break of 0.6994 minor resistance will turn focus back to 0.7047 resistance instead.

In the bigger picture, with 0.7393 key resistance intact, medium term outlook remains bearish. The decline from 0.8135 (2018 high) is seen as resuming long term down trend from 1.1079 (2011 high). Decisive break of 0.6826 (2016 low) will confirm this bearish view and resume the down trend to 0.6008 (2008 low). However, firm break of 0.7393 will argue that fall from 0.8135 has completed. And corrective pattern from 0.6826 has started the third leg, targeting 0.8135 again.

Economic Indicators Update

Australia Westpac Consumer Confidence dropped sharply by -4.1% to 96.5 in July, hitting a two year low. The deterioration came as a surprise as confidence was not supported by recent positive developments, including RBA's rate cuts and easing US-China trade tensions.

Deepening concerns over Australian economic outlook were the main drivers in decreasing confidence. Expectations in economic conditions for the next 12 months dropped -12.3 to 87.1. That's the lowest level in four years. For the next 5 years, expectations index dropped -6.7 to 91.6.

After two rate cuts in June and July, Westpac expects RBA to stand pat at next meeting on August 6. Updated economic projections to be released then would give the best guide to how the RBA sees the case for further policy action. Westpac expects a further 25bps cut most likely coinciding with a downgrade to the Bank's growth and inflation forecasts in November. Though, it said "the timing of this next move remains highly uncertain".

Full release here.

Leaders of both US and China trade teams held "constructive" telephone conversations yesterday, as negotiations continued. US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin joined the talks. On the Chinese side, there were Vice Premier Liu He and Minister of Commerce Zhong Shan. The call was also confirmed by Chinese Commerce Minister in a brief statement today.

White House economic adviser Larry Kudlow said the talks "went well" and were constructive, but "there are no miracles here". He added, "there was headway last winter and spring, then it stopped. Hopefully we can pick up where we left off, but I don't know that yet."

Kudlow also said yesterday that "President Xi is expected, we hope in return for our accommodations, to move immediately, quickly, while the talks are going on, on the agriculture (purchases)." However, it's also reported by Hong Kong South China Morning Post that Xi had made no specific commitment regarding the purchases during the meeting with Trump at G20 in Osaka. So far, no significant increase in purchase is noted yet.

Markets brace for Powell’s testimony

US indices were mixed yesterday ahead of the first of Fed Chairman Powell’s testimony later today. Oil prices are higher after weekly data showed a strong drawdown and reports circulated of a possible cyclone building in the Gulf of Mexico. Bank of Canada is expected to leave rates unchanged.

US30USD Daily Chart

he US30 index fell for a third day yesterday but did recover from one-week lows to close only slightly in the red

The 100-day moving average at 26,057 is edging closer to the 55-day average at 26,107

Aside from Powell’s testimony on Capitol Hill, the minutes of the last Fed meeting will also be released today. Markets expect a dovish tone to discussions.

DE30EUR Daily Chart

The Germany30 index fell for a fourth day yesterday with Deutsche Bank shares still under pressure and disappointing guidance from BASF

The index touched the lowest in almost two weeks and is falling toward the 55-day moving average at 12,202

There are no major data releases from either Germany or the Euro-zone scheduled for today. ECB’s Lane said ECB remains ready to act to keep inflation on track, adding they have the tools necessary if more easing is needed.

CN50USD Daily Chart

The China50 index fell for a sixth straight day yesterday, the longest losing streak since February 2017

The index touched the lowest level in two weeks and is falling toward the 55-day moving average at 13,142

Official trade negotiations restarted yesterday by phone. They were described as “constructive”. China’s new loans are seen rising by 1.7 trillion yuan in July, according to the latest survey of economists. That would bring the total for the first seven months of the year to almost 10.8 trillion yuan ($1.56 trillion).

Financial markets are eagerly awaiting the beginning of the Fed's easing cycle. While the US economy enters the 11th year in the current expansion, global economic slowdown worries, a neverending trade war, and deflationary pressures have the Fed poised to deliver an insurance cut this month and possibly more in the following meetings to ensure a soft landing.

The most anticipated event of the week is Fed Chair Powell's two days of testimony on Capitol Hill. Despite a robust labor market, the US economy is slowing down, as global growth concerns remain elevated as trade tensions show no immediate signs of easing. Equities could fall under pressure if Powell commits to only one rate cut and if he is content on waiting to see if inflation continues to stabilize and if the risks to the economy improve. The Minutes will also be released in the afternoon and should be rather dovish, but will likely take a backseat to Powell.

• Powell to reiterate Fed will act as appropriate (signalling the July meeting is live)
• Souring global trade and risks to the outlook could raise 2019 Fed rate cut expectations from 2 to 3
• Stocks receiving some support from renewed trade talk momentum

The fate of the US stock market will continue to rely on a strong dovish commitment by the Fed, continued progress with the US-China trade war and for the upcoming earnings season to keep on targeting a strong fourth quarter rebound. The dollar is potentially poised to finally breakout of its tight range against the euro on expectations the Fed will be delivering more rate cuts than the other major central banks going forward.

Trade War

Trade updates have been quiet since the G20 sideline meetings between President Trump and Xi. Markets were relieved that the two leaders resumed negotiations, with the US holding off on delivering new tariffs and reducing pressure on Huawei, while China resumed purchases of agricultural goods and the continuation of existing US tariffs.

Today, US and Chinese officials continued negotiations over the phone, in what is expected to shortly yield an in-person meeting. Both sides are politically motivated to wrap this up. China initially thought they would be better waiting out Trump, but now that it seems he is likely to get re-elected. China will try to persuade him to agree on more purchases of US goods in exchange for the limited changes on structural reform.

CAD

Bank of Canada is the last central bank that needs to go full dove. Canada's economy is starting to show signs of weakness, but they should be able to wait a couple more months before having to signal the economy is in need for stimulus. Inflation and GDP remain strong, while the consumer and trade have softened. Currently markets are pricing in a 24% chance of a rate cut at the October 30th meeting.

Earnings Season

Another earnings season is upon us and this should be a very disappointing one with negative growth around 2.3% and possible further cuts to guidance. So far we have seen a severe cut to guidance from the world's largest chemical maker, BASF. Levi Straus reported disappointing earnings that missed the lowest estimate, while Pepsico continued its string of strong results. Next week the financial report and the health of the consumer will closely be watched. In order for markets to remain confident with US stocks the US consumer needs to remain strong.

MXN

Minister Carlos Urzua surprise resignation sent the peso tumbling, marking the first major resignation in Andres Manual Lopez Obrador's government. Urzua was well respected and his criticism of the AMLO administration highlights a growing skepticism for the government's policies. Assistant Finance Minister Arturo Herrera was named Urzua's replacement, a strong pick, but unlikely to dissuade the overall concerns with the Mexico's leadership. The peso could remain vulnerable in the short-term as risks for further sovereign downgrades are growing.

GBP

The British pound fell earlier in Europe after a survey showed economist feel the BOE will not change policy until the second quarter in 2021. Parliament was busy in debating amendments in what was supposed to possibly take the no-deal risk off the table. The amendment that did pass will require Parliament to gather every two weeks to provide updates on North Ireland, making it impossible for a new PM to suspend Parliament in order to deliver a no-deal Brexit.

Oil

West Texas Intermediate crude surged after the weekly API oil inventories posted a third consecutive strong draw. Crude stockpiles fell 4.97 million barrels last week, possibly suggesting demand has been improving. Energy markets could continue to rise if Fed Chair Powell's testimony to Congress reinforces bets that will cut rates will begin with the July 30-31 meeting and that more risks to the economy would likely warrant further cuts.

Gold

Gold is slightly softer on the stronger dollar that stemmed from the better-than-expected employment report that lowered Fed rate cut bets. The bull case for bullion remains intact as stimulus is coming from the big four central banks (Fed, ECB, PBOC, and BOJ). Earnings weakness is also expected to support the yellow metal as we start to see further cuts to guidance.

The Canadian dollar is lower against the US dollar on Tuesday. The narrative of multiple rate cuts by the Fed was put into question on Friday with a massive rebound in the American job report for June. The number of jobs was higher than expected and is raising concerns that three rate cuts might be too much.

In true monetary policy maker fashion Fed Chair Powell did not say much to guide markets during his address at the Boston Fed. The highlight of the week will be his two-day testimonies in front of congress and the senate. Sandwiched between the two will be the release of the minutes from the FOMC in June.

The Bank of Canada (BoC) will release its rate statement on Wednesday at 10:00 am, but the market anticipates the central bank keeping rates intact at 1.75 percent. Governor Poloz will host a president conference at 10:15 am, where he is expected to continue with the dovish rhetoric that has become common place with major central banks. The BoC is not facing the same pressures as the Fed to lower interest rates, but trade headwinds have not shown signs of dissipating, which will give Poloz plenty to discuss during his press conference.

The US dollar is higher across the board on Tuesday head of Fed Chair Powell’s testimony before congress and the release of the minutes from the June FOMC, where the central bank held rates unchanged, but did signal an impending interest rate cut.

A massive job gain in June is making the market second-guess the number of possible rate cuts this year by the Fed. A strong rebound from a disappointing May report showed a 224,000 gain in June and boosted the US dollar against major pairs.

The dollar had been under pressure from rising interest rate cut probabilities but also the fact that the White House was ready to open another trade war front, this time with Europe. US-China talks at the G20 did not provide any new details, but a new round of talks is expected. Tariffs against the EU diverted safe haven flows away from the US dollar and into other options like the Swiss franc, the Japanese yen and gold.

OIL – Crude Rises on Middle East Tension and Lower API Inventories

West Texas Intermediate and Brent both saw gains on Tuesday. Crude traders remain on the lookout for guidance and tomorrow will bring plenty of news and data to chew on. The rebound of the dollar has had limited effect on energy prices, but if Fed Powell does not keep singing to a dovish tune in his testimony before congress, the rebound could turn into a rally.

Crude inventories in the US will be published on Wednesday at 10:30 am. The rise of US production has been a major factor to the decline in crude prices, and only the concerted effort of the OPEC+ and geopolitical supply disruptions have been able to offset it temporarily.

The tensions in the Middle East could escalate into an energy supply nightmare if the Strait of Hormuz is closed or the traffic from tankers severely disrupted.

The API crude stockpiles published on Tuesday afternoon fell more than forecasted with an 8.1-million-barrel drawdown and traders will await the official Energy Information Administration (EIA) weekly crude data for direction on energy prices.

GOLD – Gold Regains some Traction Awaits Fed Chair Testimony and FOMC Minutes

Gold is close to positive territory on Wednesday after touching weekly lows. The yellow metal stumbled as the greenback got its mojo back after a strong jobs report published on Friday. Gold is within sight of the $1,400 price level awaiting the testimonies of Fed Chair Powell and the release of the FOMC minutes form the June meeting.

Gold was boosted as investors bought back into long gold positions as the metal is once again a top safe haven during periods of high uncertainty. Rising tensions in the Middle East, ongoing trade wars and another UK Prime Minister to reopen Brexit have created demand for gold.

The Fed is expected to keep the dovish rhetoric in place, not confirming or denying how many rate cuts or when they will happen, but by mere mention of lower interest rates it validates the market’s expectations of a rate cut sooner rather than later. Lower rates will act in favour of the metal, and if the minutes give the same impression gold could break above $1,400 once more.

USD/MXN Mexican Peso Drops After Finance Minister Resigns

The Mexican peso fell more than 1.6 percent on Tuesday after the surprise announcement by the Finance Minister Carlos Urzua after a year in office. The currency dropped immediately given the reasons cited by the former minister for tendering his resignation, political decisions that lacked support from economic fundamentals.

President Lopez Obrador announced Urzua’s successor by promoting from within the Finance Ministry Arturo Herrera Gutierrez.

The MXN broke above the 19-peso price level and even after the new appointment still trades at 19.15. Investors will be monitoring the situation, with an eye on what Urzua’s resignation means for the financing of large projects that have been promised by the Mexican president.

The Fed is gearing up for its first rate cut to start a new monetary easing cycle, after the White House has been piling on pressure to lower rates despite economic indicators not raising massive red flags. The peso has been trading higher on dollar softness, but now political issues have put the Mexican currency on the back foot.

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