The U.S. Dollar is trading in mostly familiar ranges as markets digest data and a plethora of developments surrounding trade deals with various nations.
Overview
This week has been characterized by events promoting a different narrative about international cooperation, with the United States President travelling across the Middle East announcing a number of agreements with nations such as Saudi Arabia and Qatar apparently representing billions towards investment in the American economy. Furthermore, there is potential for signing a major deal with India, which is interested in overtaking manufacturing that the U.S. does not want directly in China.
Geopolitically, the headlines are also putting focus on negotiations between Russia and Ukraine to honor a ceasefire and gather with various leaders to form some sort of lasting peace pact. All of this is helping investors feel relief, sinking oil prices as there are concerns for oversupply down the line if Iran thrives, and settling FX flows for now.
On the data front, Retail Sales for April came in lightly lower than expected, almost flat, but surely demonstrating a deterioration from the prior pace of 1.7%. Producer Price Index figures meanwhile showed an unexpected contraction instead of the 0.3% advance estimated. These could be signs of lower consumption out of fears over a slowdown turning more recessionary. Traders are coping with renewed bets that this year will see two interest-rate reductions. We close out the week with Housing numbers as well as the University of Michigan Consumer Sentiment.
What to Watch This Week…
- Banxico Today 2PM
- US Housing Starts and Building Permits 8:30AM Friday
- University of Michigan Consumer Sentiment 10AM Friday
- Monex USA Online is always open
The complete Economic Calendar can be found here.
EUR ⇑
The Euro is gaining slightly, getting away from its weakest levels to the Buck since start of April. After reaching its best levels since November 2021 on April 21st, the shared currency has been on a major slide, taking down its value by over 2.5%. Although negativity has not been prominent in European news, the Buck has regained after a tumultuous Q1 that witnessed the start of De-Dollarization as global markets followed a “Sell America” trade trend. Nothing is certain when it comes to guidance, but there is a sense that following Germany’s policies to spend more and end an era of austerity, the shared tender may have been overbought.
MXN ⇑
The Mexican Peso remains around its strongest levels over the Buck since mid-September of last year ahead of the central bank announcement later today around 2PM. Banxico is expected to cut by 50 basis points in order to alleviate the financial environment and spark a little growth for an economy that has felt the loss of confidence it carried last year. The latest reading of Q1 seasonally-adjusted Gross Domestic Product revealed just a 0.2% uptick. We will see the final reading next week. If the Banxico officials seem to believe the 50-bps cut is enough for a while, MXN levels could stay put.
