Memorial Day weekend ahead, possible peace deal too

Varying narratives regarding resolutions to the conflict with Iran have kept FX moves a bit limited, but thus far this month the Buck has managed just under 1.0% advancement, (actual 0.8%) per the Bloomberg Dollar Spot Index. In the latest reports, there is growing enthusiasm for a peace deal after news outlet Al-Arabiya claimed exclusive access to text of an anticipated agreement between the White House and Tehran.

While inflation remains a concern globally, evidence of contraction on productivity indices helped elevate USD value as a safe-haven asset. It is clear that the effects of high costs are affecting business activity with contractions showing up on the other side of the pond being indicative of struggle for various industries. Nevertheless, stock markets are staying positive, with the S&P 500 Index headed for its longest streak of weekly gains since 2023. Meanwhile, some worries in the treasury bonds market linger with this week testing multiyear highs for yields as inflationary expectations and bets of tight monetary policy climbed.

While all attention will be on whatever the headlines provide in terms of relief or fear over Middle East diplomacy and traffic over the Strait of Hormuz, domestically we will assess consumer sentiment with the release of the University of Michigan Consumer Sentiment Survey for May (exp. 48.2), at 10AM, which could end up as the lowest reading in the survey’s existence since it was established in 1952. For now, the Buck is steady and not awfully far from reaching its highest point since first week of April.

What to Watch This Week…

• Univ. of Michigan Consumer Sentiment 10AM
• Monex USA Online is always open

Complete Economic Calendar can be found here.

EUR ⇓

The Euro is hovering around its weakest level against the Buck since the beginning of April, affected by underwhelming economic indicators pointing to economic decline. Purchasing Managers Index readings revealed a poor situation for the Euro-zone with the PMI Composite coming in at 47.5, representing a 31-month low. The sub-index Services component was the lowest in 63 months. A big reason for the awful data was France where the composite PMI was the weakest since November 2020. While prices are the biggest issue with energy costs incessantly rising, there could be lack of consensus between European Central Bank members down the line on addressing economic dwindling.

GBP ⇓

Sterling has also been impacted by weak numbers on the data front as PMIs also became cause for nervousness about the health of the U.K. economy. The Composite reading entered contractionary territory dropping from previous 52.7 to 47.9, with below-50.0 results a sign of regression. Respondents were honest about the Middle East becoming their number one cause of head-scratching when making investment decisions and hiring. In the past two weeks, Pound has declined by 1.4% in value.