The week of swings is coming to a close as the U.S. Dollar is weakening following a correction of course for global markets ending these wild days with inflation fears ebbed.
Overnight, a sea of greenwashed over global exchanges that managed to crawl back after seeming doomed towards a downward trend because of concern that oil and other basics could even experience shortages. The behavior out there has been driven by unnecessary panic, but rationality says we are in the midst of recovery with plenty of bumps and there is no need to fear anything but the virus that has afflicted us since last year. In that regard, there has been enough progress that now fully vaccinated adults can feel comfortable not wearing masks in most places outside the home. Children and teens are now the next walls to break through in the inoculation campaign.
Since the Fed will not stand in the way of inflationary increases yet, risk has returned and all currencies across the board are losing to the buck. This week represented the biggest regression for equities in eleven weeks. Iron Ore and other metals have come down in price, but the Oceanic currencies of Aussie and “Kiwi” remain some of the most energized along with petrol currencies. Retail Sales for April disappointed with a contraction of (-0.8%) when 0.6% was expected. We will see if Industrial Production and the University of Michigan Consumer Sentiment will paint a better picture of last month.
What to Watch Today…
- No major events scheduled for today
The Euro traded within a half percent range this week and is now trying to return to gaining as global markets return to the optimistic narrative. Although inflation looks to be accelerating, there is no need to believe that the global stance that most central banks have taken to keep a very easy financial environment will end. Full employment is also the goal in Europe and price rises will not force the ECB’s hand. Additionally, re-openings are happening and now Germany is joining in lifting most restrictions to the fully vaccinated.
Sterling is also back on the rise as re-openings increase next week. Without much in terms of data, the U.K. is being driven by optimism that Summer will see economic indicators expand and that in the long-term, the government can figure out a way to appease all the British territories. This week meant a huge break for Pound, which we still think remains overvalued, but will no longer be at risk of depreciation because of independence referendums being pushed.
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