Daily Market Update

U.S. Dollar on the weaker side with downward revisions

May 26, 2022

The U.S. Dollar is back swinging the other way as markets digest data from the first quarter. 

Overview

Across the board, the buck stopped gaining and recovering unlike the day prior. This morning’s release of a bigger-than-expected contraction in Gross Domestic Product for the second revision of U.S. Q1 performance at (-1.5%) vs. (-1.3%) goes along with a mood across markets that there is a slowdown and no clear way out of it. On the positive side though, Initial Jobless claims for last week were lower than forecast and Personal Consumption did expand significantly in Q1. We will get more data to analyze tomorrow as we close ahead of a holiday weekend for the U.S. observing Memorial Day.

Yesterday’s Minutes seemed to offer some relief to investors as there was no surprising hawkishness and markets can price in the gradual hikes approach. Volatility remains spiked considering that some outlooks offer a long-term recessionary risk and China’s lockdowns continue despite a commitment from various officials and financial authorities to stimulate the economy. Markets will look to see if Summer brings along a strong or a weak wave of inflation that could indicate central bank interest rate increments could be discounted down the line. We believe this could bode poorly for the greenback’s value and at the moment of writing, it kept dropping.

 

What to Watch Today…

  • No major economic events scheduled for today

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EUR

The Euro has regained some value this morning following pro-hike talks from officials and public discussions at the meeting in Davos. At the moment, it feels like the change of mentality to a more contractionary approach, as detailed by a post from European Central Bank President Lagarde, is helping the euro stay buoyant. Additionally, the impact of positive headlines from China or relief to the globe seems to be having a stronger effect on the shared currency. As the Russian conflict with Ukraine continues, expect progress for Ukraine’s military and economic efforts to be a booster for the Euro.

 

GBP

The Pound made some progress after falling earlier in the week following an announcement by the government aimed at helping ease the economic stress amongst families. Chancellor of the Exchequer Rishi Sunak vowed the government will make a one-off payment to eight million low-income households. There is also a plan to collect a “Temporary Targeted” 25.0% tax on oil and gas profits. We shall see if faith in Sterling grows with recent doubts over the Bank of England’s ability to remain on its tightening roll.

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