The U.S. Dollar is trading in familiar ranges after hitting the brakes on its winning streak that brought it up to its strongest level in a month in recent days.
Overview
The U.S. Dollar is trading in familiar ranges after hitting the brakes on its winning streak that brought it up to its strongest level in a month in recent days. While there is some risk-appetite improvement, there are still mixed signals for what is to come for the remainder of the year, with plenty of evidence of negative items accumulating. China is currently going through a period of deflation, when prices in general contract, as opposed to inflation. The latter has been a main source of concern ever since the supply-chain woes of the pandemic, but deflation comes with major headaches as the inability of prices to grow produce lower revenues, less thirst for credit, and ultimately recessionary pressures.
Global markets, however, are also seeing some items returning to price growth such as natural gas in Europe, which jumped the most in two months. Tomorrow’s U.S. Consumer Price Index figures are also expected to show a slight rise of the annual rate in comparison to last month. We shall see if the dollar holds off until tomorrow to move much.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The Euro stopped the depreciation it experienced after falling to its weakest point in over three weeks. Yesterday, Italy’s poorly delivered announcement of a tax on banking profits disturbed traders and investors, causing a bit of a sell-off for shares in the financial sector. The story has flipped today after more details came out, and it was explained that only a few of the largest banks would be affected, and it would represent a small insignificant percentage instead of what was feared. Additionally, the boost to natural gas and grain as a result of the armed conflict negatively impacting trade has added to inflationary expectations that set the European Central Bak to stay mostly hawkish on the policy measures. Euro is getting a breather and could see a pivot towards more gains depending on tomorrow.
GBP⇓
While there is not much in terms of flows for many pairs out there, including the Sterling, it is worth noting the growing worry that the U.K. economy is experiencing too much economic lag. Forecasts and analysis from the London-based National Institute of Economic and Social Research are predicting that the U.K. is about to close a fifth year of lost economic growth as it will fail to reach its pre-pandemic level of GDP growth until perhaps 2024. The U.K. has managed to avoid ugly scenarios but seems to be currently experiencing more pain than previously thought. We will see how this also impacts the build-up to 2024 elections with the institute assessing that the government has mismanaged goals of fomenting more regional equality.
