The European Central Bank is now expected to begin raising its overnight benchmark interest rate several times over the summer giving a lift to the common currency. Weak Chinese economic data set the tone overnight leading to concerns over global economic activity.
Economic Data this Week:
Tuesday: Retail Sales for April
Wednesday: Industrial Production for April
Thursday: Housing Starts and Building Permits for April
Friday: Philly Fed Business Outlook for May, weekly Initial Jobless Claims, Existing Home Sales for April
May 16, 2022
EUR/USD 1.0425 GBP/USD 1.2251 USD/CAD 1.2923 AUD/USD 0.6926 USD/JPY 129.13 USD/CNH 6.7850 USD/ILS 3.3959 USD/MXN 20.09 USD/CHF 1.005 USD/INR 77.8288 USD/BRL 5.06 USD/SGD 1.3942 USD/DKK 7.1414 USD/SEK 10.0686 USD/NOK 9.8089
The Dollar Spot Index (BBDXY) is slightly weaker to start the week after gaining 0.5% last week. Empire Manufacturing data for May came in much weaker than expected (-11.6) vs. the survey of 15.0. The contraction is the second over the past three months and highlights the difficulty businesses have in gauging demand and fulfilling inventory due to supply-chain issues and the potential for a slowing US economy.GBP
Sterling continued its decline last week, losing 1.23% against the USD to trade at a low of 1.2166 amid Brexit concerns. GBP is recovering slightly during this morning's session as investors prepare to hear the government's changes to the Northern Ireland Protocol tomorrow.EUR
The euro is stronger overnight as new surveys show that ECB rate hike expectations are continuing to creep higher, with economists now predicting three 25bps hikes over the course of the year. Comments from ECB member Villeroy this morning suggested that a consensus on normalizing monetary policy is emerging within the central bank.CAD
The Canadian dollar is flat relative to the US dollar despite a lower oil price. Housing Starts for April were higher although Existing Home Sales were weaker (-12%) due to increasing mortgage rates. Manufacturing and Wholesale Trade Sales for March both came in better than expected.ASIA/PACIFIC
The Chinese renminbi remained at its weakest levels since October 2020 after April Retail Sales and Factory Output fell significantly below estimates. Some economists expect Q2 growth to be as low as 0.5%. The zero-COVID policy is to blame for China’s most recent data showing a rapidly slowing economy.
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