The U.S. Dollar rose further in yesterday’s session as markets pay attention to the economic indicators for the first months of the year and try to gauge direction as investors concern themselves with the potential for higher yields.
Overview
Data this morning out of Europe was shockingly positive with Purchasing Managers Index figures rising to their best level in six months. However, Durable Goods Orders for February in the U.S. contracted, defying expectations of expansion at (0.5%), but an actual reading of (-0.9%).
It is possible this only convinces economists that the potential for growth is just not being met. Thus far the FX flows have not turned against the buck, rather other currencies look weaker. A new survey by Alignable is actually showing very little confidence among business owners with almost half of small businesses saying they fear they will close before the first half of the year.
Our PMI numbers will drop at 9:45 AM, which could exacerbate the pessimism over the global recovery as even in a more secure and vaccinated U.S. things are not quite picking up. This also serves the Fed, which has said repeatedly we are in the midst of growing pains that we have not experienced before, and it is best to leave things alone. There are some news items we will see develop in the form of adding to the big-spending agenda bill a provision that allows the government to negotiate better drug prices. We will see if Treasury Secretary Janet Yellen makes any waves later as she speaks to the Senate at 10 PM.
What to Watch Today…
- No major events scheduled for today
EUR ⇓
The Euro lost ground despite good data in its favor as the vaccine rollouts chaos as well as the need for Germany and others to plan lockdowns is affecting the ability to mount an actual recovery. It is had to envision great things for the continent as it struggles with discrepancies between each nation. The ugliness that has brewed between the U.K and the EU are alarming markets since it is clear the two parties act less than partners post-Brexit and more like adversaries. Overall, the EU requires a turnaround and while PMIs shocked, it is likely those numbers could crash if indeed lockdowns are met and productivity dissipates.
GBP ⇓
To reinforce the point, even more, U.K. Prime Minister Boris Johnson is reported to have told his cabinet that the reason the U.K. is doing better in the COVID fight is simply “greed.” Indeed, the nationalist approach to combating COVID has created new problems tied to a lack of unison and the uneven nature of the recovery is revealing that 2021 is not off to the beginning we had hoped for.
While the U.S. situation looks clearly improved, economic indicators are far away from allowing anyone to exude much confidence. PMIs and PPIs in the U.K. came out in the positive, while Consumer Price Index numbers failed to meet expectations.
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