What you need to take care of on Wednesday, May 25:
The American dollar remained weak on Tuesday, despite the market mood being sour. The EUR/USD pair rallied beyond 1.0700 as more ECB officials vowed for a 50 bps rate hike. The GBP/USD pair, however, fell following softer-than-anticipated local data to end the day in the 1.2520 price zone.
S&P Global released the preliminary estimates of its May PMIs. Most European manufacturing and services indexes came in below the market’s expectation, except for the German ones, which were slightly better than April ones. The EU services PMI came down to 56.3 from 57.7 in the previous month, while the manufacturing index printed at 54.4, below the 54.9 expected.
UK figures were also disappointing, as business activity slowed down to its weakest since early 2021, according to the official report. Finally, the company reported that the US manufacturing index slid to 57.5 as expected, while the services index contracted to 53.5 in the same period.
Meanwhile, inflation did not recede while the coronavirus-related lockdown in China exacerbated supply chain issues. In fact, JP Morgan downgraded China’s growth forecast to 3.7% from 4.3% in 2022, while other research institutes followed suit.
The AUD/USD pair trades just below the 0.7100 level, while USD/CAD holds above 1.2800. Safe-haven currencies were sharply up, with USD/JPY down to 126.80.
Gold price trades near its weekly high at $1,869.71 a troy ounce, while crude oil prices posted modest gains. WTI is now changing hands at around $110.00 a barrel.
Asian and European indexes closed in the red. Wall Street spent most of the day in negative territory but managed to recover ground in the final hour of trading. The DJIA settled in positive territory, but its counterparts remained in the red.
Demand for safety boosted government bonds, with yields down to fresh weekly lows.
The Reserve Bank of New Zealand will announce its monetary policy decision and is expected to hike the main rate by 50 bps to 2%.
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EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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