In what’s become a common element recently, the United States Dollar starts this morning’s session on the front foot as month-end flows dominate choppy trading and debt ceiling talks continue.
Overview
The House of Representatives is scheduled to vote on the proposed package this afternoon, and markets largely expect the measure to pass this chamber. It’s important to note, however, that this passage will likely not come without some pain or even the possibility of further concessions as hard-line members of the GOP, known as the Freedom Caucus, have sworn that the proposed bill is not something they can stomach and will stop it by any means necessary.This afternoon’s fight will likely provide extra month-end volatility for the Buck, even amidst already-choppy trading on the last day of May. Traders will watch the House’s floor session like hawks. If the bill manages to make it through the various factions that have developed through the House, President Biden, and Senate Leaders foresee no difficulty in the upper congressional chamber.
Elsewhere, traditional economic indicators have returned to the forefront of the market’s mind. Chinese manufacturing activity for April, published this morning, showed a deepening contraction in the sector and raised further fears about the state of the global recovery. Investors sold off all Chinese-related assets across the board, and USD gained some strength on haven flows.
What to Watch Today…
- No major economic events are scheduled for today
- Monex USA Online is always open
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EUR ⇓
The single currency started the overnight trading session with a large loss against USD, and though slowly regaining some ground, it still sits roughly a third of a percent below yesterday’s close. Inflation data out of Germany and France contrasted with data out of Spain and showed a slowing pace, prompting traders to decrease their bets for the European Central Bank’s terminal rate. Currently, the ECB is only expected to hike twice more, placing the terminal rate of this cycle at 3.75%, still below the US’s target rate.
GBP ⇓
After showing such strength yesterday morning, Pound Sterling peaked and fell heavily against the Dollar yesterday afternoon and into this morning. Former BoE policymaker Michael Saunders warned today that the UK’s “most painful period” may still be ahead as the nation digests the impact of the Bank of England’s prolonged hiking cycle. Catherine Mann of the central bank is scheduled to speak today after a survey showed UK business confidence fell for the first time in three months – it appears the UK’s cost of living crisis may not be over yet.
