Markets unclear as good news and bad news combine

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Markets unclear as good news and bad news combine

JULY 15, 2021

The U.S. Dollar is currently trading in tight ranges as markets digest a deluge of data from both China and the U.S. while also embracing the ongoing dovish stance by Fed’s Chairman Jerome Powell.

Overview

Today will be the second day of testimony to Congress by the official who insists that the economy is not on a hot streak and that prices are rising but will not stay there nor keep growing at that pace. What is interesting about his determination is that it comes at a time when other central banks are starting to consider a more hawkish approach, so the recovery is less dependent on loose monetary policy. Additionally, investors are concerned that the record highs in equity valuations could come crashing as overall the economy seems to have lost the momentum of the first quarter.

Nevertheless, this morning’s survey of New York’s Empire Manufacturing revealed a record reading of optimism among suppliers, so some regions are flying while others struggle. Initial Jobless Claims, for example, increased more than expected for the start of July. Meanwhile, other Fed officials are feeling like they need to express disagreement with Powell, as St. Louis Fed President James Bullard believes the economy has reached “substantial further progress,” meaning it is time to start thinking about the moment to taper.

We shall see where the buck heads from here as you have no consensus in the Fed and China revealed good enough growth though lower than thought. Their economy should still manage to grow by over 6.0% this year.

What to Watch Today…

  • No major economic events scheduled for today

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EUR 

The Euro has gotten away from some weakened levels as yesterday’s rally against the buck kept it from hitting new multi-week lows. While the European Central Bank seems more likely to remain dovish and not change their policy a lot in the next year or so, there are economic indicators to watch that if improved significantly could spark an upward movement for the shared currency. Consumer Price Index figures will be out tomorrow while Purchasing Mangers Index will be out Monday. Yesterday, EU leaders held a meeting to set their course of action for going fully green and reduce green gas emissions by 55.0% or more by the year 2030.

GBP 

Sterling has gained yesterday off of better-than-expected CPI figures but started retreating once again because of concerns over the COVID variants affecting travel and other trade. While many central bankers are starting to sound the bell for tightening, Governor Andrew Bailey of the Bank of England has stated his dissatisfaction with growth and the dangers still remaining because of unvaccinated people getting ill. Expect Pound to have room to lose as the BOE holds a relatively cautious eye on the economy while other issues related to trading with everyone else brew up.

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