Daily Market Update

Greenback Prevents the Weekly Advances of Others

May 22, 2020

The U.S. Dollar gained ground this morning as this week closes with uncertainty in the relationship between the U.S. and China over trade and potentially a diplomatic disagreement over Hong Kong.

Overview

Although there are headlines that point at optimism over renewed Chinese government commitment to trade and to fulfill Phase One purchase levels, they are being countered by a decision to start establishing new norms for Hong Kong that threatens its independence from Beijing.

As the U.S. digests the situation, clearly the Hong Kong Seng and other exchanges are losing on the dire thought that there will be major demonstrations and only further protests. Certainly, this is like a nail on the slip-n-slide to recovery we are trying to find economically that can give better guidance.

We enter Memorial Day weekend with less news and activity as many countries are still observing holiday, but releases of Sales stats this morning managed to make a dent on the strength some currencies had built up against the buck. Overall, there is a sense that we may get to a vaccine within a year with giants like Astra-Zeneca Plc and scientists from the Oxford University starting human trials and shooting to have something accomplished in September.

Nevertheless, a lot of the same unresolved issues from 2019 are starting to come back, such as Brexit, and these will play as obstacles to the global growth outlook as it tries to leave COVID-19 effects behind. As long as there is fear, the buck can always manage to ease the advance in others and these weekly up-then-down swings will go on for upcoming June and perhaps Summer.

 

What to Watch Today…

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EUR

The shared currency is about to go into the weekend with a 1.0% gain for the week, that is as long as Friday flows allow it. It is clear that the European situation will be improving as the Franco-German recovery fund is released to various national needs. Impressive how the Fed and ECB have evolved to help, but nothing manifests cooperation like fiscal aid, and for this reason we are definitely optimistic on Euro prospects down the line. Additionally, this week had some mention of revamping the Green Deal the EU parliament wanted to launch, which would aim at revitalizing infrastructure in an environmentally advanced way.

 

GBP

The Pound also fell this morning, as it has most of the week, based on poor data and foggy path to prosperity. April Retail Sales showed a loss of 18.1% in activity, which is yet another sign the U.K. has been smacked harder by this that some of its neighbors. With Brexit negotiations looking bad and the economy diving into a deep recession likely, Sterling could struggle next few months.

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