Ceasefire at peril, Dollar up slightly
The U.S. Dollar is trading in mostly favorable ranges as armed conflict has returned in the Middle East, while markets look for silver linings.
Indeed, strikes are back on over Iranian territory and U.S. military bases, with negotiations for a deal failing to materialize into a peaceful agreement. Yesterday featured a few announcements regarding a draft that were then denied by the White House. While economists continue to worry about the inflationary impact from the chaos, some analysts believe that while some fire is being exchanged, a deal between all parties involved is just a matter of time.
Personal Consumption Expenditures from April are expected to show a jump from a year ago, which would put inflation above February levels. Officials in central banking, such as the Fed’s Philip Jefferson, are warning that the inflation risk is certainly high, with the effects of tariffs also being felt more by both suppliers and consumers. Many around the globe believe there will be no other way to combat the pressure than by increasing interest rates down the line. Durable Goods Orders, as well as Q1 Gross Domestic Product, will be released at 8:30 AM.
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EUR ⇓
The Euro is tilted a bit downward as it has been for the past two weeks, losing around 1.4% of its value against the Buck within that period. Stocks naturally fell overnight, but there was a bit of surprise from Confidence surveys that came in better than anticipated. Economic Confidence actually registered higher in May than in April, while the Services sector was also impressively optimistic. Next week, there will be a focus on inflation out of the Eurozone that could make stronger cases for tighter monetary policy measures ahead.
MXN
The Mexican Peso is recovering after falling during yesterday’s trading session, heading all the way down to its weakest point since Cinco de Mayo celebrations. Energy anxiety remains a catalyst for higher prices and its possible this will convince Banxico’s, Mexico’s central bank, voting members to shift from cutting interest rates to a tighter policy mentality. As with European data, next week as the last month of Q2 starts will be crucial for digesting the hard numbers for productivity and beyond.