Risk Falls on New Trade Tensions; Dollar Flat

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Risk Falls on New Trade Tensions; Dollar Flat

The U.S. dollar was mostly flat against its major counterparts as U.S. equity futures have swung between gains and steep losses.

Overview

Early this morning, there have been more signs that the Chinese-American relationship is further strained.  It is reported that the Trump administration is moving to block the shipment of computer chips to Hauwei, the Chinese telecom company.  This week’s tension between the world’s two largest economies are reminiscent of 2019 and add an extra wrinkle that investors have to deal with.

Historically poor data continued to roll in this morning.  April retail sales fell 16.4% smashing low expectations of a12.3% decline. The fall is the steepest since records began in 1992.  Sales excluding automobiles fell 17.2%, nearly doubling the expected fall of 9.6%.  A separate report showed that manufacturing in the Empire State fell to -48.5.   Later, industrial and manufacturing production for April will hit the wire at 9:15 EST and the U. of Michigan sentiment is due out at 10 a.m.

What to Watch Today…

  • Industrial Production at 9:15 EST

Complete Economic Calendar can be found here.

HAPPY HALF-HOUR: JOIN US ON THURSDAYS…

EUR

The Euro swung between moderate losses as optimistic Covid-related headlines balanced out awful data.  First quarter gross domestic product showed that Germany fell into a recession.  The 2.2% drop in the first quarter was the largest fall since 2009. And it is worth reminding ourselves that the shutdown went into effect in earnest late in the quarter, meaning the second quarter will likely be much worse.

On the bright side, Germany reported a drop in new infections even after the government relaxed stay-at-home measures.  The German Bundesliga, the top-flight of German soccer, will restart their season tomorrow morning in empty stadiums.  I have cleared my morning schedule!

GBP

The British pound has remained under pressure all week and the beleaguered currency dropped another half a percent overnight.  Britain’s lead Brexit negotiator, David Frost, said “vey little progress” has been made in Brexit talks.  The next round of talks begins June 1.

The sterling has added to losses even as Bank of England Governor Andrew Bailey batted back speculation that the central bank will introduce negative interest rates in the coming months to combat the ill effects of Covid-19.

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