Daily Market Update

Greenback loses ground as China aid increases

May 20, 2022

The U.S. Dollar is down this morning following positive signals from European and Asian trading sessions. 

Overview

Indeed, investors worldwide seem to be welcoming the news that China will continue with steps to ease the worry about long-term growth potential. In its latest measure, China’s lenders cut the 5-year loan prime rate by a record 15-basis-points in order to increase loans as well as support the housing sector with more affordable mortgages. Commodities such as metals are up while the Stoxx Europe 600 rebounded by 1.5%, erasing weekly losses. Naturally, the buck has felt the impact and is now 1.4% weaker than the start of the week, per the Bloomberg Dollar Spot Index.The G-7 finance ministers’ meeting resulted in billions of dollars committed to facilitating liquidity for Ukraine, agreed upon as the U.S. Congress passed a $40.0BN package to aid the invaded nation as well. We shall see if global momentum continues after a week that was characterized by growing concern about the globe’s ability to move past “stagflation.” Plenty of data will get to be chewed next week to assess where we are and what has to be done.

 

What to Watch Today…

  • No major economic events scheduled for today

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EUR

The Euro has climbed by 2.0% thus far this week adding to its recovery lately and is no longer near its weakest point in five years. We are almost at the point where we began this month. Minutes from the latest European Central Bank meeting, in addition to hawkish commentary from officials, have increased bets of a hike in the July with some even shooting for an increment of over 30 pips instead of just 25 basis points. Europe’s economy is coping with a lot, but the resilience in data lately and the hope for Ukraine to hold Russian aggression back, if not end it, are factors relieving the continent of some of the pessimism that has clouded it.

 

GBP

The Pound improved this despite some negative economic data in the form of Consumer Confidence, which has fallen to a record low in May. The world is trying to find good news to hold onto, which is aiding all kinds of assets and ignoring the idiosyncratic issues of the U.K., such as Brexit-trade woes and a troubled economy. U.K. officials have warned that growth could be hard to find long-term as 2023 is predicted already to be a down year, so any type of economic streak that defies this narrative will boost the Pound and other currencies naturally. As far as details on the Northern Ireland protocol, the current deal has not yet been picked apart, and perhaps better headlines on this front could improve GBP’s outlook.

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