Dollar ending month on the positive

Markets have been acting with cautious optimism as efforts continue at the negotiating table with the U.S. and Iran seeming closer than at any point in the past three months to achieve an end to armed aggression and the restoration of traffic through the Strait of Hormuz. The water passage has become a crucial chokepoint for energy markets, with some economists predicting no relief in oil and fuel prices until next year, if indeed something materializes between the countries involved. We shall see if a ceasefire extension can be announced before the weekend, but the lack of concrete breakthroughs has kept the Buck steady throughout the week while holding a monthly gain thus far, of almost 1.0% in value, according to the Bloomberg Dollar Spot Index.

While headlines over Iran keep overshadowing concerns about other items, yesterday’s release of a variety of data points domestically painted a picture of ongoing “stagflation.” April Personal Consumption Index figures showed prices remain stubbornly increasing and now average an annual pace of 3.8% over the 3.5% prior. Personal Spending also slowed down, while it should be noted that Personal Income came in at 0.0% vs 0.4% forecast. Furthermore, in the first quarter’s Gross Domestic Product, the second reading came in lower than the original at 1.6% vs. 2.0%, thus showing that low levels of growth are more accurate. Next week, economic indicators will be more focused on labor, so perhaps it will help move the needle some.

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EUR ⇓

The Euro has been trying to recover losses experienced in recent weeks, but it is likely to remain subdued for May, with a loss just a bit above half a percent. European stock indices have been on edge while analysts keep warning about the inflationary problems that could become permanent without a solution to the obstructed energy trade. It is worth remembering that the Eurozone has been coping now with a two-front chaos when it comes to energy sourcing as Russia/Ukraine’s war persists and the Strait of Hormuz is restricted. Today, reports of Russian drones hitting Romania have put N.A.T.O leadership on alert, so we shall see what impact this has as a developing story.

JPY ⇓

The Japanese Yen has been on a losing streak, resulting in a 1.4% loss throughout May against the Buck, as the continuation of the conflict affects the economic outlook. The month has not been full of bad economic news, with Gross Domestic Product impressing and inflation growing at a steady pace that merits the Bank of Japan increasing interest rates down the line. However, the global outlook has been downgraded, and plans for spending in Japan may be affected without a resolution to energy costs and accessibility. The Bank of Japan will meet on June 16th, which will help us see if a hike is envisioned for what remains of the year.