YCL - Week Ahead: After Rallying Since Mid-April Are The G10 Currencies Tired?
2024-05-18 13:25:00 ET
Summary
- The highlight of the week may be the preliminary May PMI estimates. Though, market participants appear to put more weight on the ISM than the PMI.
- Former President Trump has threatened higher tariffs on all Chinese goods if he is elected. The direct impact on US inflation will likely be negligible. However, the domestic and international signal is clear.
- The dollar has generally been trending lower. The momentum indicators are getting stretched but have yet to confirm a dollar low is in place. Still, our message is one of caution and that the risk-reward may favor a dollar bounce.
- Sterlinghas appreciated by about four cents over the past four weeks. It recoveredsmartly from a pullback slightly below $1.2650 to launch another assault on$1.27, which it settled above for the first time in two months.
The monthly cycle of central bank meetings and high-frequency data slow in the week ahead, though the UK and Canada report on prices and demand (retail sales). The highlight of the week may be the preliminary May PMI estimates. We play down its significance in the US because its strength seems to be an outlier and it is in expansion territory while the ISM not. The dollar has generally been trending lower, with the yen being the only exception among the G10 currencies since mid-April. The bottoming of the two-year yield near the recent 4.70% low may reflect the end of the interest rate adjustment following the recent string of mostly weaker than expected high-frequency data and the softer CPI reading. The momentum indicators are getting stretched but have yet to confirm a dollar low is in place. Still, our message is one of caution and that the risk-reward may favor a dollar bounce....
Week Ahead: After Rallying Since Mid-April, Are The G10 Currencies Tired?