Week In FX Americas – US Sentiment Unchanged, Focus On ECB

To sell in May and go away never really materialized for capital markets. Even month-end volatility is a disappointment. Event risk focus now looks to the ECB for hope next week. Will Draghi and company following through aggressively enough to combat low inflation and lending issues? Capital markets needs them to, otherwise the remainder of Q2 will be laboriously unexciting, except for a month of World Cup football.

Draghi has dropped many hints about next weeks meeting and investors have not been adhering to one particular outcome just yet. Many expect the ECB is going to cut its policy interest rate and/or announce targeted liquidity measures, with a view to supporting bank lending. Other expects a mixture of the above with cuts to deposit rates and some money market liquidity measures. The problem for the EUR bear is that any or all may not be enough to weaken the single unit currency outright. All the recent open market talk seems to have set the “expectations bar extraordinary high” and whatever is finally announced next week may not be a big enough of a surprise to punish the EUR to weaker levels.

In the US, on Friday saw the final May reading of UoM consumer sentiment. Its headline was little changed from the preliminary reading (pushing to 81.9 from 81.8). Digging deeper, the current conditions index was revised down to 94.5 from 95.1, but the expectations index was revised up to 73.7 from 73.2. Despite the month-over-month decline, the headline average was similar to the first four-months of this year (81.7). This would suggest that consumers might be ignoring the weak Q1 economy. Nearly half of all households anticipated a decline in inflation adjusted incomes and living standards over the next 12-months. Will the softer print convince many to revise down their estimates for retail spending?

Expect geo-political and event risk to be dealt with within the confines of the already established tight trading ranges, at least until investors get a better understanding of what Draghi and company is all about on June 5th.

• Fed Member Wants Faster and Bigger Rate Hikes – MarketPulse
• US Consumer Spending Falls in April – MarketPulse
• US Economy Growth Sputters But Stocks Continue on Record Rally – MarketPulse
• U.S. Dollar Falls From Seven Week High on GDP – MarketPulse
• US Agricultural Groups Pressure Japan for TPP Agreement – MarketPulse
• US GDP Contracts in Q1 Due to Cold Weather – MarketPulse
• U.S. Dollar Strong as Others Wane – MarketPulse
• U.S. Dollar Hovers Near Two Month High – MarketPulse
• Fed’s Lockhart Says Higher Rates in 2015 But No Rush – MarketPulse
• U.S. Dollar Enjoys Durable Goods Orders Gaining – MarketPulse
• U.S. Dollar Near Eight Week High on Upbeat U.S. Data – MarketPulse
• US House Prices Slow Down Due to Lower Demand – MarketPulse
• US Durables Rise In April – MarketPulse
• Mixed Views on the U.S. Economy Bouncing Back – MarketPulse
• Canada’s GDP Expected to Beat US in Q1 – MarketPulse

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.