Daily Market Update

Six-Month Best for the U.S. Dollar as Trouble Manifests Itself Elsewhere

May 23, 2018

The U.S. Dollar rose to its highest level overall in six months according to the Bloomberg Dollar Spot Index, mostly as a result of as combination of being a safe-haven to risk-aversion in equities and the release of poor economic indicators across Europe.


Asian markets also tumbled because of doubts over a resolution to mixed relations with North Korea. A meeting tentatively scheduled for June may not happen until later and “that’s OK,” per President Donald Trump. Kim Jong Un wants more themes than just denuclearization.

Markit Purchasing Managers Index figures will be out at 9:45AM and are expected to show more expansion than last month. New Home Sales will come out at 10AM while Fed Minutes from their last meeting will be monitored at 2PM, which most watchers will seek for guidance regarding the total of hikes for this year to the main interest rate: 3 or 4. We think the minutes could be optimistic, but low impact on current fluctuations.



The Euro went on a freefall overnight as PMI figures revealed less than expected growth and the lowest level of expansion for the measure in 18 months. Manufacturing and Services are sluggish and the mix with the political instability factor of Italy has sunk the Euro to its worst level since mid-November. Indeed, the shared currency has fallen in hard times and we see it stuck down in these ranges for the summer.



The Pound dwindled to its weakest level since mid-December as inflation failed in meeting estimates. Consumer Price Index registered at 0.4% versus 0.5% predicted for April, thus bringing down the annual average to 2.4% from 2.5%. This gives even less incentive for the Bank of England to increase interest rates as they originally wanted to combat inflation, which clearly is not blowing up.

Brussels talks are ongoing this week, but Prime Minister Theresa May is getting no help as even her Foreign Secretary Boris Johnson is publically pushing her to move on with negotiations and accomplish something. Sterling is at low levels we estimated as realistic for Q2 2018.


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