Risk-off sentiment prevails as markets unconvinced US trade talks will settle
Peter Compton | May 28, 2019
Trade rhetoric continues to weigh on markets, supporting the US dollar's safe-haven status. The European Parliament elections showed polarization, adding to uncertainty especially around the EU’s position on Brexit. Italy is at odds - again - with EU rules as the proposed Italian budget exceeds debt-to-GDP thresholds. The UK prepares for a leadership change as Prime Minister May steps down in two weeks.
Economic Data this Week:
Today: 10:00am EST – Consumer Confidence for May and at 10:30 the Dallas Fed Manufacturing Survey
Wednesday: Richmond Fed Manufacturing Index
Thursday: Final PCE inflation data and GDP for Q1, Trade Balance for April, Retail and Wholesale inventories, April Pending Home sales
Friday: Personal Income for April, PCE inflation data for April, Chicago PMI for May, Univ. of Michigan Consumer Confidence for May
May 28, 2019
EUR/USD 1.1192 GBP/USD 1.2688 USD/CAD 1.3462 AUD/USD 0.6932 USD/JPY 109.51 USD/CNH 6.9234 USD/ILS 3.6119 USD/MXN 19.0815 USD/CHF 1.0061 USD/INR 69.6837
The US dollar strengthened yesterday as general uncertainty about global trade and European Parliament elections took their toll on the risk appetite of global investors. President Trump visited Japan over the weekend and said talks were going well, with security and trade the two topics of focus.
US housing data came in more-or-less in line. Thursday and Friday this week are data heavy and markets will be looking for confirmation the US economy continues to grow steadily.GBP
The political uncertainty continues to weigh on sterling as the currency struggles to hold onto any intraday gains. The FTSE 100 ended Friday in the green and was closed Monday for a bank holiday.
After securing more UK seats than any other party in the European Elections, Nigel Farage and his Brexit party vowed to use the momentum to bring the prospect of a no-deal exit from the EU back to the negotiation table.EUR
The euro is flat today having lost ground yesterday after Italy’s budget proposals clashed with EU rules - again. The European elections this past weekend showed a polarization of opinion as the Greens gained as did anti- euro, anti-EU and generally anti-establishment parties.
Adding further uncertainty to the politics of Europe, the outgoing Chancellor of Germany, Angela Merkel, stated that her hand-picked successor is “not up to the job”.CAD
The Canadian dollar is modestly weaker today in front of tomorrow’s Bank of Canada meeting. The markets are not expecting any change in interest rates at tomorrow’s meeting.
Oil is up slightly in light post-holiday trading after last week’s precipitous fall.ASIA/PACIFIC
The Indian rupee was flat after Narendra Modi’s sweeping election victory.
China’s offshore yuan weakened while the New Zealand dollar strengthened against the greenback.
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