Daily Market Update

U.S. Dollar in Tight Swings as Risk-Aversion Fades

May 14, 2019

The U.S. Dollar is trading in mixed ranges, weakening slightly against other safe-haven assets while gaining some ground back against majors such as Euro and Pound.

Overview

While issues with trade continue to consume most news-time, it is worth noting that positivity remains among business owners per the National Federation of Independent Business Small Business Optimism survey this morning, which beat expectations for April as it has been steadily rising. Since economic numbers continue to paint a much better picture here than elsewhere, the buck will prevent major losses against its counterparts unless their indicators exceed estimates.

China detailed its retaliatory measures against the U.S. by imposing tariffs on $60.0 billion worth of products. Cotton and soy were especially targeted by Chinese policymakers, aiming to make the trade conflict unpopular across the agricultural industry. We shall see if any talks resume, but clearly markets did not take it well. Some relief came in this morning as risk-appetite returned, but expect worse if any escalation comes.

 

What to Watch Today…

  • No major events scheduled for today.

Complete Economic Calendar can be found here.

 

EUR

The Euro tried to stay buoyant, but once more the winds of underwhelming productivity are affecting its outlook and that of the economic bloc entirely. Plagued by contraction throughout 2019, March Industrial Production fell (-0.3%) as expected and represents a worsening situation than month’s prior. It is possible that April numbers reveal some of the recovery we have mentioned as revealed by other items like Producer Price Index and expansion in services as well as manufacturing.

Nevertheless, it is a disappointing piece of data that reveals a worrisome lack of expansion ahead of the much awaited Gross Domestic Product revelation for tomorrow. The expectation for the bloc’s quarterly growth is 0.4%, but anything higher would be a surprise and at least on a temporary basis give Euro a boost, just doubt it would be permanent.

 

GBP

The Pound keeps falling this morning based on the uncertainty over Theresa May’s ability to keep her job as Prime Minister. Her conservative Tory party deeply divided over Brexit, now seems willing to give up on negotiating much and is looking for ways to force her resignation. Newspaper headlines in England are as blunt as stating that her next move may be her last. For today, she is attempting to meet with her cabinet to see if there are any other alternatives than her failed cross-party deal talks.

EU Parliamentary elections will be coming at the end of the month and since Britain is not out, it will feature candidates and sit members. Most forecasts see Labour sweeping and leaving very little in Tory-agenda representation. This political party crisis is why May is under tremendous pressure to just give up. Nigel Farage’s Brexit Party is now a threat to her party’s electoral base.

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