Mixed Feelings on Markets as May Closes
MAY 27, 2021
The U.S. Dollar remains mostly in recent ranges without a ton of movement as markets seem mixed with news highlights focused on global efforts to improve infrastructure and address climate change.
Some large oil companies such as Exxon are now facing pressure from investors that are concerned about the environmental impact of business as well as the calls by the International Energy Agency to count less on oil price advancements as demand will keep falling from newer technologies. Additionally, President Joe Biden will be proposing a $6.0 billion spending bill for infrastructure so details will come and likely move markets.
The data this morning regarding Initial Jobless Claims hovered around the expectation of 425K at 406K while Continuing Claims remain high at 3.6MM. Personal Consumption was the only Q1 indicator to exceed estimates while Gross Domestic Product growth came in at 6.4%, only expanding slightly less than the 6.5% expected. One surprising piece of negative news came in Durable Goods Orders for April which contracted (-1.3%) instead of expanding by 0.8%. This surely is an indicator that there was a slowdown in business activity from Q1 to start of Q2 as recent data does show less momentum in the economy than before. We shall see what direction the dollar takes, not much consensus on direction at the moment.
What to Watch Today…
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The Euro is still trading around strongest levels last seen in January despite some concern over allowing too much freedom in travel too quickly. Germany was joined by France in declaring that the U.K. is a dangerous destination at the moment for their citizens since the variant that has caused so much chaos in India is believed to be prevalent in London. As precaution, restrictions have tightened for British tourism seekers. We will see also if European Central Bank members change their tone from recent members who publicly have stated that there is no need to worry about price spikes, the Pandemic Emergency Purchasing Program, or anything else until the economy shows true signs of overcoming pandemic adversity.
The Pound has been slowly, but surely, losing ground to the dollar after the month seemed GBP friendly because of the ability to re-open the United Kingdom after solid inoculation success. One thing to notice is that the Bank of England may not be looking to apply negative interest rates soon, but they could be part of discussion next BOE meeting as the reassess the central bank’s role. Trade has affected London big time and Boris Johnson is still hoping the U.S. can arrange something as he had promised during his time Brexit campaigning for better free-trade deals.