No deal confusing markets

Indeed, we are a bit puzzled as to what may come next. A 60-day ceasefire extension and eventual re-opening of the Strait of Hormuz were going to be crystallized in text, but now that the U.S. has launched some “defensive strikes” in southern Iran, traders and investors are scratching their heads. May has been marked by inconsistent attempts to put the war to rest that would ease concerns over energy and trade. The month has been an up-and-down, wild roller-coaster ride for the Buck, which thus far has managed to appreciate by roughly half a percent, per the Bloomberg Dollar Spot Index.

For now, the U.S. is promoting a narrative that the light at the end of the tunnel is near, with U.S. Secretary of State Marco Rubio saying negotiating a resolution could just “take a few days.” Meanwhile, the likes of aluminum and other raw materials are experiencing their biggest shocks to supply in history. Domestically, we will see what data presents us for the economic situation as the next few days feature growth with the second reading of Q1 Gross Domestic Product and inflation via Personal Consumption Expenditures on Thursday, as well as Durable Goods Orders. Friday, we close with few figures while later at 10 AM we get the Conf. Board Consumer Confidence and Expectations survey for the month.

What to Watch This Week…

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EUR ⇓

The Euro is down as May has represented a loss of about 1.0% to the Buck as contractions in productivity have revealed themselves with the Middle East troubles affecting outlooks and mood. Recent indices have shown the Eurozone has entered negative territory in its expectations, while also seeing a tremendous reduction in business activity. As long as anxiety keeps a grip on markets, Euro-assets are likely to remain in retreat while statistics point to potential recessionary pressures. Thursday will provide further insight into overall confidence via surveys, while the start of June will bring more hard data to perhaps make a case for a stimulus-driven European Central Bank down the line.

MXN

The Mexican Peso has experienced strengthening lately, unlike most other peers to the U.S. Dollar, with a 3.0% advancement since May started. Oil prices jumping, nervousness about energy, and excitement regarding hosting some World Cup games are keeping the Mexican Peso interesting to play. There will be an inflation report released by Banxico tomorrow, but other than that, we do not have much in terms of indicators in the final days of May. Next week will be packed with all kinds of gauges that could present a challenge to the currency’s rise.