Daily Market Update

King Buck! Markets sink with no solutions to trade

May 23, 2019

The U.S. Dollar is dominant in the face of global stocks tumbling and markets concerned with the potential for further barriers to trade.

Overview

Officials from the European Union were trying to start trade talks with the U.S. to settle issues with auto tariffs and other free-trade matters, but those have been postponed since the U.S. administration has to focus on China. The anxiety over this has manifested in bad numbers for auto companies, thus driving equity markets down. In this case, the greenback solidifies its status as main safe-haven. The U.S. Dollar Index (DXY) is at its strongest point since May 2017.  

We are also reading more about economists takes from around the globe that see this trade impasse with China as more of a long-term accommodation that could have friction and obstacles for the next two to three decades. Adjustments will continue globally and this shift makes all other assets insecure for now. Risk-appetite can come back, it would just take a headline or two positively bringing some resolution, but this week’s tone overall has been quite negative.

 

What to Watch Today…

  • PMI Composite 9:45AM
  • New Home Sales 10AM

Complete Economic Calendar can be found here.

 

EUR

The Euro is down to near its worst levels in about 23 months, the second lowest level of 2019. The major dip is due to a mix of worldwide pessimism added to disappointment in Purchasing Managers Index data in the region. German and French expansion was not enough to bring the bloc out of a contractionary period, in which less investment is being put forth by companies themselves.

This can be attributed to trade woes and the concerted effort to form a new EU parliament: one that might look different politically and with different goals. Starting today, elections will take place and the results will determine if there is more cohesion towards integrating the countries further or not.

GBP

Pound bulls are starting to jump ship as the currency is testing its weakest levels since 2016. Anything related to Britain and Brexit seems to be like the film “Groundhog Day,” where we keep waking up to the same worries, learn something new, someone is at risk of losing their job, and wake up to live out the same day because time seems to be completely stuck.

Well, 2016 was when we had the referendum, we are hearing about the chances of a second one because ultimately it was a plebiscite that created this problem to begin with. The government had no plan then and no plan now. The discord is scaring business leaders, created political gridlock, and is now affecting already downgraded prospects for U.K. growth.

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