The U.S. Dollar returned to rise once more on divergence in economic performance with Europe and Britain.
Durable Goods Orders this morning solidified the economy’s ongoing progress in longer-term investment as the figure revealed a 0.9% expansion versus an expected 0.5% when you exclude transportation costs. Additionally, all previous figures were revised upward to highlight a healthy Q1. Aside from trade and geopolitical concerns, the greenback can count on staying buoyant as long as good data keep coming America’s way.
Later this morning we may get some good quotes out of central bank governors such as the Fed’s Jerome Powell and England’s Mark Carney who will be speaking and exchanging thoughts at an event hosted by the Riksbank in Sweden. We only have Consumer Sentiment by the University of Michigan survey left for today and the week. The buck will likely sustain gains as we close May.
The Euro remains in its weakest level since mid-November and could continue to suffer as the fear over Italy leaving the Euro is now a bet some traders are placing some odds on. A new Prime Minister was established, Giuseppe Conte, a law professor without any administrative experience who debuted by saying that his focus would be on an Italy for Italians.
Many are worried that the Eurozone’s turn towards populism could threaten the EU’s integrity as policies are pushed that negate anything in Brussels. We believe the coalition needs to be tested and then EU will be prepared to do so, but the instability will certainly be a thorn for the rest of the year on Euro value.
The Pound went back to losing ground as a revision of the first reading of Q1 Gross Domestic Product figures confirmed the measly growth of just 0.1%. Retail Sales impressed yesterday and made many believe that it is possible Q2 will be much better than Q1 because of the weather improving, but all the points gained fell overnight.
GDP is certainly an issue as financial decision makers weigh opportunities to return to growth with all of Brexit’s negative effects considered. We believe that this is where the Pound should be and see little reason at the moment to expect any reaction that would propel it. The problems in the U.K. have been mounting and taking a toll.