The U.S. Dollar is closing the week shedding away some of its gains across a number of currencies as stock exchanges went back into green territory overnight.
It has been a week primarily focused on trade headlines, naturally, however economic data for the U.S. has been dwindling the entire time. Purchasing Managers Index (PMI) was close to not even expanding and this morning’s release of Durable Goods Orders shows that indeed there is a sense of uncertainty over future investments with contraction of (-2.1%), worse than the (-2.0%) expected.
It is not clear where markets can go consistently since there are many things up in the air regarding trade agreements and now elections for EU Parliament. We will know the U.K.’s results by Sunday night as well as others. For the remainder of the month, we still count with a full week of data trying to gauge if consumers are feeling an economic pinch and if Gross Domestic Product will be revised up or down. It is possible that an ongoing faltering of economic indicators could lead to a worsening greenback to close the month. Can only be a safe-haven asset for so long? We shall see.
What to Watch Today…
- No major events scheduled for today.
The Euro returned to its average for the month after surging back from its lowest levels in two years.The dip was temporary since PMI figures had been disappointing, but U.S. equivalent data worried traders more. After all, the alarms over potential recessionary pressures have been toned down since evidence shows that inflation, productivity, and even wages are going up after two very slow quarters prior that failed to meet any forecast.
The Euro-bloc is by no means in the clear, but Euro could see a return to strengthening if indeed the continent can show that it can maintain growth and avoid contractions. We think these swings will continue, but perhaps Euro is saving its best appreciation for the final third of the year.
Sterling is flirting with going down to its weakest level of the year and could be up for a deeper downturn now that it is official Theresa May will no longer serve as Prime Minister of the country. The Tory politician, who was elevated to PM post-Brexit referendum and the resignation of David Cameron, did her best for three years trying to maneuver through an unprecedented political quagmire. Ultimately, the country’s divisions and no clear path towards an acceptable Brexit deal in Parliament after arduous negotiations with the EU have led her to quit, somewhat by mutual agreement.
Her political party will now look to fill the vacuum of leadership and it is likely former Foreign Secretary Boris Johnson will be the main name to replace May. Others are also under consideration, but what is clear from an outside perspective to us is that a no-deal scenario is back into play and Sterling could depreciate rapidly as summer progresses towards that concept.