The U.S. Dollar is trading in mostly tight ranges with a market calm as Q2 gets underway with little in terms of surprises.
Overview
After obsession over monetary policy expectations in the first quarter of the year, by now the fight over inflation and some easing in price growth itself have faded affecting marketing conditions in a negative way. Much of the concern over banking stability has also dissipated as now earnings for auto companies and take become more of a point of focus for investors. Tight financial conditions are given and markets do not seem uneasy about them.While volatility remains high, some things are going according to the policy effects the Fed was hoping for. Today’s Jobless Claims came in higher than expected, meaning that labor is not flourishing, and along with some contractions in inflationary gauges, it merits a telegraphed 25-basis-points hike. The more prepared markets are for Fed policy measures, the better it will be for equities and economic confidence down the line. We believe that the buck will slowly but surely regress as the Fed’s actions become less hawkish and a pause in hiking gets nearer.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The Euro is holding steady ahead of Consumer Confidence figures for the Euro-zone to be released at 10 AM. It is expected to show improvement from the prior survey. By now, it has been established that the European Central Bank will remain on tightening mode. ECB board members, Isabel Schnabel, and Philip Lane continued the narrative by explaining that the new mandate will remain in which loosening of monetary policy is not the goal.
GBP ⇑
Sterling is also holding up its value ahead of major Retail Sales releases tomorrow expected to show further contraction. Without a lot of major risk events, the steadiness of central banks in the Western world is becoming predictable and all eyes are on the validity of optimism over China’s return to open trade as well as tourism. If anything slows down activity or growth in the Emerging Markets, then recessionary fears could grow to then aid the buck, but for now, a global recovery only bodes poorly for dollar strength.
