The U.S. Dollar remains strong, now trading overall around the best levels since fears over the COVID outbreak first came in 2020.
Overview
A more than just cautious world is moving with fear over what is to come down the line in terms of recessionary damage. Indeed, the Federal Reserve’s determination to combat inflation has come at a cost with many concerned over the impact it can have on increased borrowing costs as the prices of most items remain elevated to record figures. However, Housing, as well as oil, have started to cool down.
Tomorrow and Thursday’s inflationary gauges in the form of Consumer Price Index and Producer Price Index respectively will provide an eye into June’s pace. Much like inflation can happen as a self-manifestation if people believe prices will hike down the line, to some economists and Fed members it seems recessionary expectations are worse than reality.
In Minutes from the Fed’s last meeting when it increased the interest rate by 75 basis points, officials reaffirmed belief in the economy’s ability to handle the increments. To them, there is no guarantee of a recession nor a soft-landing, but slow growth is admitted. Earnings from banks and other companies could push other markets downward thus we believe the buck will be able to sustain its current levels.
What to Watch Today…
- No major economic events are scheduled for today
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EUR
The Euro continues to flounder as the global mood continues to sour over the energy crisis and the lack of clarity over how to handle the lack of resources in the Eastern hemisphere. The conflict has brought also devastation indicating there will be a major human toll in the form of casualties as well as those seeking refuge away from Ukrainian territory. Today’s release of ZEW Consumer Expectations only continued to sink as both the German and Euro-zone gauges fell to their most pessimistic since the Omicron variant outbreak in May of 2021.
GBP
Sterling remains fragile and keeps hitting new lows from March 2020. Current political pressures are also adding to the economic uncertainty with Conservatives having a few options in picking a replacement for Boris Johnson as Prime Minister. Rishi Sunak already has a slogan “Ready for Rishi,” while Liz Truss, the U.K. Foreign Secretary is also sounding like a favorite. One risk we must note is the possibility that the opposition Labour Party decides to do a no-confidence vote, that if successful, would push for a general election. Although chances for this are not the highest, it could make for headwinds as Labour makes arguments over incompetence, lying, as well as new fiscal spending in the face of Brexit-related problems.
