Daily Market Update

Buck falls to Euro, rises over Antipodean

May 24, 2022

The U.S. Dollar dropped against most of its peers with the exception of gaining against the Pound and the Oceanic currencies, AUD & NZD.

Overview

Trading sessions have paid close attention to Purchasing Managers Index figures across regions and the respective currencies of those expanding climbed over the buck. In the past two weeks, the greenback’s overall value has dropped by 2.5%, according to the basket in the Bloomberg Dollar Spot Index. A belief that perhaps equities and global economic doom may have reached a bottom as well as acceptance of ongoing monetary tightening by central banks seems to be fueling a bit of a revival in risk appetite.

The world’s economic recovery from the very worst of the pandemic has been uneven. PMIs released for Japan was slightly better than expected, meanwhile in Australia the composite PMI fell from the previous April expansion. In Britain, inflationary figures grew while PMI reading came in way lower than expected at 51.8 vs 56.5. On the other hand, countries in the Euro-zone had results above the forecast.

We shall see if the rally in equities and against the dollar can continue to be fueled by China’s State Council decision to offer major tax relief to businesses to make up for the sluggish economy post-lockdowns. COVID is not done and now there are reports of people developing “monkeypox.”

 

What to Watch Today…

  • No major economic events scheduled for today

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EUR

The Euro rose to its strongest point in a month as it reached fresh new highs following reaction to hawkish commentary from Christine Lagarde, as she posted online a rationale for the European Central Bank turning a more hawkish leaf. In a post on the ECB’s official website, the Chairwoman explained that deflationary pressures from the past are unlikely to return, thus it is time to address the current price-growth and normalize policy.

The fact that she went out of her way to do this has sent very bullish signals to those wondering if the shared currency had room to grow after quickly falling this month. While some nations remain in slow mode, France and Germany’s Composite PMIs were higher than expected. As headlines improve, expect Euro to keep its momentum.

 

GBP

The Pound has been dropping this morning primarily as data has served as evidence of worsening fears about a potential recession down the line for the U.K. As mentioned above, PMIs disappointed while the private sector reported major setbacks from the record inflationary growth as well as trade concerns brewing from less-than-ideal relations with the EU over trade. We see volatility ongoing and the cycle of good news globally mostly aiding a revived Euro.

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