Daily Market Update

U.S. Dollar Thrives as Other Markets Remain on Vacation

May 01, 2018

The U.S. Dollar continues to trade in mostly strong ranges as Asian and European markets are closed for “May Day” holidays.

USD

The resurgence of the greenback is due to a rise in optimism based on evidence that proves the U.S. economy is in better standing than that of the EU as well as the U.K. Recent spikes in Gross Domestic Product have aided our dollar-up narrative of good data equaling currency appreciation.

Purchasing Managers Index Manufacturing Index numbers will be posted at 9:45AM as well as the ISM’s Manufacturing gauge and Construction Spending out at 10AM. Geopolitical developments have caused global markets to flourish and the buck is experiencing a positive correlation with the good news. Ahead of the FOMC meeting tomorrow, chances of a hike stand at 35.3%, so an increment would be a shock to the system and most expect Powell to add to borrowing costs in June instead.

 

EUR

The Euro is swimming around its worst levels since January 11th as the quiet flows of activity help rejuvenate the U.S. Dollar. Along with global news propelling the dollar, poor data in the form of German Retail Sales, which contracted once again, clarified that the economic momentum the Euro-zone carried for the last year and a half is starting to find friction.

The declines in indicators do not bode well for Euro prospects short-term and long-term we will need to monitor the likelihood of another round of elections in Italy, where they change Prime Ministers often and there is a vacuum of legislative leadership. Luigi Di Maio, leader of the Five Star Movement who recently won the most votes to parliament, said to reporters that no government coalition has been built and he is frustrated.

 

GBP

The Pound is also down to its weakest point since start of January after Markit UK PMI Manufacturing statistics showed less expansion than expected for April and a downgrade to March figures. Our forecasts on a depreciating Pound are coming to reality as Brexit uncertainties meet cold hard data showing that the process thus far has created problems, not solutions to the economy.

 

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