Compass Global Markets' Blog

Tony's Market Blog - 23 May 2017

Posted by Tony Boyadjian on May 23, 2017 at 12:02 PM

 USD is weaker, EUR & GBP are stronger & AUD firms above 74 US cents.

2 suspected suicide bombs have exploded at a pop concert in the North London city of Manchester. Tragically, there are reports of multiple fatalities & injuries.

Recent US economic data  have been disappointing - GDP, CPI, core inflation, retail sales, housing activity & construction numbers have been soft. 

USD sell-off is a result of the alleged scandals against the Trump administration, raising suspicion of "obstruction of justice" by President Trump & concerns that pro-US economic growth policies (tax reform & increased fiscal spending) may be derailed.  

The Fed is unlikely to raise rates in a slowing economy. We expect the USD to correct lower again this week awaiting Thursday's FOMC May meeting minutes on thoughts on reducing the size of the Fed's balance sheet. Nevertheless, a 14 June 0.25% US rate hike is almost fully priced in at 94%. As a result, we don't expect any further USD upside momentum. The misalignment between US data & Fed speak continues after Fed's Bullard suggested only 1 more rate hike in the US this year...Meanwhile, impeachment talk against President Trump continues to gather momentum!

AUD has strengthened 1.2% against USD since last week in light of a firm global economy & a rise in commodity prices due to USD weakness. Australia's improved current account deficit has kept the AUD above 74 US cents, however, headwinds from increased volatility, political uncertainty in the US, sluggish Australian wages growth & low inflationary pressures will likely keep AUD/USD limited to 0.7520 this week

S&P Global Ratings have downgraded credit scores of regional Australian financial institutions as it warned about the risks of a property market downturn.

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Tony Boyadjian

Senior Vice President,  Foreign Exchange

 

  Email Tony: tony.boyadjian@compassmarkets.com

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Topics: Report, Market

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