What you need to know on Monday, May 18th:
The dollar closed the week with a strong note, despite reporting on Friday that Retail Sales fell by 6.4% in April, the largest slump on record. The Michigan Consumer Sentiment Index beat expectations, printing 73.7 in May.
The EUR/USD pair closed the week as it started it, a handful of pips above the 1.0800 mark. News over the weekend showed that German EU parliamentarian Weber said that he favours declaring a twelve-month ban on Chinese investors who want to buy European firms.
The pound was the worst performer, undermined by Brexit woes. The UK and the EU, both reported a deadlock in talks, amid disagreement on the EU’s demand for a level playing field. Andrew Haldane, Bank of England's Governor, said that “there are other options beyond that, or alongside that, that we're looking at as well,” when referring to negative interest rates. He also discussed the use of QE, although he later clarified that he was not implied policymakers are poised on any of those options.
Commodity-linked currencies fell on Friday and closed the week with a soft tone against the greenback, despite oil and gold posted substantial weekly gains. WTI settled just below $30.00 a barrel, while spot gold hit a multi-year high of 1,751.75 a troy ounce.
US indexes settled on Friday near its daily highs but remained in the red weekly basis. The market’s sentiment continued to fluctuate between fears of economic downturns and hopes on reopenings. Treasury yields remained depressed throughout the week.
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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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