Daily Market Update

Markets on the decline aid Dollar further

May 29, 2019

The U.S. Dollar is trading in familiar positive ranges as once more global markets headed downward based on uncertainty about the escalation of trade conflicts.

Overview

As oil and other commodities slipped in price, petro-currencies and indexes across the board fell by an average of over 1.5% along with hopes for a market recovery based on steady data and uptick in confidence. Trade remains the biggest thorn on investors’ confidence.

Bond markets are giving cause for concern as the 3-month 10-year U.S. Treasury bond yield is the most inverted since 2007, usually a precursor of a recession. Nevertheless, many suggest the bond markets are just showing how little faith there is in other assets out there and the overwhelming flight to safety is messing with yield returns. Naturally, the buck is also gaining, but if Gross Domestic Product is revised downward and other negative headlines materialize, counterparts could pare their losses.

 

What to Watch Today…

  • Bank of Canada meeting 10AM
  • Richmond Fed Manufacturing 10AM

Complete Economic Calendar can be found here.

 

EUR

The Euro cannot pick up steam and now focus on political friction seems due to keep it subdued against the greenback. Italy’s Deputy Prime Minister Matteo Salvini seems to be taking enough hold of power that he may not need support from the ally Five-Start movement, which worries centrists in the EU who worry the country will not abide by financial rules.

Already proposals to further cut taxes and go beyond the budget deficit are looking to be implemented; only exacerbating the EU’s fiscal regulatory woes. If indeed Italy requires a lot more economic leniency, the Euro cannot be expected to rise rapidly or with confidence as we head into summer.

CAD

The Canadian Dollar is about to finish this month almost a full percent weaker following turmoil in oil prices and doubts over its economic health. Indeed, the Canadian GDP has shown contraction or no growth in recent readings and trade dynamics looking gloomy certainly put a brake on the momentum our neighbor’s economy once carried.

It is possible “Loonie” could see a turnaround especially if Prime Minister Justin Trudeau succeeds in ratifying the much-awaited USMCA (NAFTA 2.0) so that new terms apply and companies know what to expect, thus invest and get things moving. We still feel optimistic about the currency strengthening the second half of the year.  We doubt anything major will come out the Bank of Canada meeting, likely with an eye toward staying cautious.

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