Daily Market Update

Global PMIs prompt USD slip

May 23, 2024

The United States Dollar is reversing yesterday’s modest gains and trading weaker across the G10 this morning after the FOMC’s minutes yesterday showed exactly what markets already knew – that Fed officials are not entirely confident that inflation is on course to return to a 2% target.


While officials do term policy as ‘restrictive,’ the higher-for-longer camp seems to be dominating the conversation, and the litany of speeches from voting members this week reaffirms that assumption. Nonetheless, USD is still losing some ground today after the Bloomberg Dollar Spot Index’s 0.3% gain yesterday, its strongest performance so far this month.

Around the world, the UK and Eurozone released their preliminary PMI readings for the month of May, showing mixed results. The Eurozone economic bloc posted stronger private sector activity than forecast, and Germany, in particular, showed expansion in all sectors except manufacturing, which still beat expectations. The continued contraction in manufacturing is, of course, still a cause for concern for policymakers in the region, but nevertheless, progress is progress, and the EUR is gaining against the USD in response. By contrast, the UK’s figures came in below expectations, a welcome sign for the Bank of England. As all readings were still positive, this eased some pressure for the BoE. US PMIs, released just a few moments ago, showed a surprisingly positive reading above all expectations, keeping dollar losses more muted but still USD remains in negative territory for the day.

As Federal Reserve cutting expectations come down, so do expectations of easing from other central banks as well – across the board, concerns of resurgent inflation have tamped down discussions of multiple interest rate cuts from the Bank of England and European Central Bank this year. Policy divergence, or the lack thereof, will continue to be a primary driver of pricing through the rest of 2024.

What to Watch Today…

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The Australian and New Zealand Dollars are both gaining an average of a quarter of a percent over USD this morning after the Reserve Bank of New Zealand held interest rates steady yesterday and Governor Adrian Orr signaled continued vigilance on inflation. Though both antipodean central banks appear to have reached their peak interest rates in this hiking cycle, they are less likely to ease substantially this year than other major central banks, opening the door for some strength for both currencies through the remainder of this year.


Mexican Peso initially gained some ground before flipping to losses against the USD this morning on the heels of both CPI and GDP releases from our neighbors to the south. All figures came in close to expectations with the notable exception of the nominal annualized GDP, which substantially undershot. Such an undershoot has been discounted, though, as the quarterly figure showed the Mexican economy grew slightly more than expected in the first quarter of this year. MXN remains just off its 8-year strongest point as the ‘super-Peso’ continues its remarkable run.


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