Tight FX, worrisome Iran, stocks face doubt
The U.S. Dollar is trading in mostly familiar ranges as markets are rattled by worsening tensions in the Persian Gulf.
For five consecutive days, the U.S. has been striking Iranian facilities and hitting sanctioned oil tankers, marking a significant increase in aggression that has left the ceasefire completely behind. Equities seem to be feeling the pain, while oil prices and the value of the Buck have held steady. S&P 500 futures fell, while other global stock exchanges also floundered as investors and analysts fear there is too much market concentration in artificial intelligence.
Retail sales for June came out just as expected, improving by 0.2% for the month; however, the May numbers were revised slightly upward. The monthly figure excluding autos did show a contraction of 0.2% vs. 0.1%. Initial and continuing jobless claims were lower than anticipated. It is worth pointing out that the Philadelphia Fed Business Outlook was quite optimistic, with apparently positive responses. Pending home sales will come out at 10 a.m., while tomorrow we close the week with industrial production and the University of Michigan Consumer Sentiment survey. Something may move the needle.
What to Watch This Week…
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EUR
The Euro has held on to its recent gains and has improved by 1.1% since the last week of June, when it depreciated to its lowest value in a year. Without many data points, indicators out of the U.S. have been enough to dent the Buck’s renewed strength witnessed last month. Tomorrow, we will get the release of June’s Consumer Price Index. The monthly measure is forecast to register a 0.1% contraction, so any downside surprises in inflation, similar to the U.S. figures that were steeper than estimated, could spark a bit of a collapse for the shared currency. On the other hand, if there is a pace of price growth, the Euro could be boosted further.
GBP
Pound sterling is down following a strong daily performance yesterday, which brought its value to the highest level since mid-May. Amid the government transition, news of a cabinet being formed by Andy Burnham at 10 Downing Street has revived optimism about the country’s management. Nevertheless, data point to trouble for the economy, with month-over-month Gross Domestic Product climbing by only 0.1%, merely making up for the prior contraction of 0.1%. Manufacturing surprised by not coming in flat, and construction dropped by more than forecast. We shall see if all the ground gained will be lost, as “Cable” collapsed at the time of writing.