The U.S. Dollar is trading in favorable ranges all across the board as risk appetite has diminished in the face of contractionary Imports figures in April.
Overview
Much of the momentum that has carried currencies away from the buck to multi-month and multi-year highs against it has relied on the positivity behind China’s activity and how it could translate into more global growth for the year. In addition to worrying about a slowdown, foreign firms in China now have to be concerned about a consulting crackdown with an aim on finding irregularities and potential spying. The move seems anti-business at a time of doubts about the second half of the year.Domestically, we are coping with the anxiety and nervousness of the debt ceiling stand-off in Congress threatening to curtail faith in the American financial system and government’s ability to pay its bills. The combination of concern over China’s ability to continue growing significantly and likelihood of more pressures as Congress debates are setting the buck up for recovery after consecutive days of losses. The sour mood is also reflecting lower demand for oil and other commodities as suppliers assess challenges and adjust.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇓
This morning, the Euro fell by half a percent, cooling down after days of gains based on the ongoing need to fight inflation via higher interest rates. Central Bank policy divergence seemed to be propelling Euro upward as the European Central Bank sought to tighten after a decade-plus of maintaining a very accommodative environment. However, traders are starting to wonder if the broad Euro rally in the last three months could be coming to an end as a slower pace of inflation and the desire not to trigger a recessionary period forces the ECB to hit the brakes. There is a chance that Chief Economist Philip Lane and other financial authorities such as Isabel Schnabel will keep the Euro from collapsing as their hawkish take is gauged this week.
GBP ⇓
The sterling is down only slightly as markets figure out how to feel after evidence that China’s economic trading activity is not as good as the globe hoped. Ahead of Thursday’s Bank of England meeting, markets seem convinced there will be a 25-basis-points hike with a very dovish tone by officials. As the U.K. faces high inflation, the BOE will defend its measures but will likely throw in an explanation as to why it is also appropriate to pause interest rate hikes to prevent a fallout in economic growth. Expect wild swings as the end of the week promises to be full of reactions.
