Victor Camargo
05/14/2021
In a volatile week, the euro rebounded for the region of 1.21 and was beingtraded above 1.213 this Friday, while optimism regarding theEurope’s economic recovery continues to be supported by the reopening and accelerationvaccinations against covid-19. On Wednesday, the European Commission raised theGDP forecast for the years 2021 and 2022, saying that growth will be drivenby private spending and investment, as well as by the increase in demand for productsexported from Europe. In addition, inflation that was below the ECB target foryears is expected to grow to 1.7% in 2021 and decelerate to 1.3% in 2022.
In contrast, the DXY index extended its losses to trade below 90.4,after retail sales data in April unexpectedly showed nogrowth compared to the previous month, suggesting a deceleration in spending byAmericans. Earlier in the week, the dollar gained strength after inflationof the USA jumped to its highest level in 13 years, which worried investors that theFed would be forced to withdraw monetary support soon.
Wall Street extended its gains today, with the Dow Jones rising more than 300 points andboth the S&P 500 and the Nasdaq totaling more than 1% each, while investorsfocus on economic recovery and seem to believe the Fed is not going to tightenmonetary support so soon. For the week, however, the Dow has fallen 2.2% so far, the S&P,2.8% and the Nasdaq, 4.6%.
In Europe, the main indices were also on the rise with the DAX 30 rising more than1%, as dovish comments from several central banks calmed downconcerns that rising inflation will lead central banks to harden themonetary policy earlier than expected. Fed Chairman Jerome Powell andAndrew Bailey, governor of the Bank of England, argued that any increasepressure on prices will be transitory and should decrease as supply chainssupply to adjust to the growing demand. In the first half of the week,However, the trading sessions worked hard in negative territory after a readinghigher than expected inflation in the US and Germany has sparked speculation thatcentral banks might have to adjust policy soon to avoid theoverheating of economies.
Unexpectedly, US retail sales stagnated in April 2021,disappointing markets that expected an increase of 1%, after an increaserevised from 10.7% in March, when the first round of stimulus checks wassent to most families. There were decreases in sales at retail storesclothing (-5.1%), grocery stores (-4.9%), sporting goods, hobby, musical instruments andbooks (-3.6%), gas stations (-1.1%) and non-shopkeepers (-0.6%), which was notoffset by the increase in automotive vehicles and parts dealers (2.9%),food and beverage (3%) and electronic (1.2%) services. The so-called core ofretail sales, which excludes automobiles, gasoline, building materials andthat most correspond to the consumption component of GDP, fell by 1.5%.Still, retail sales are expected to rebound in the coming months, as that the economy continues to recover and state and local governments are still shrinkingplus the business restrictions imposed because of the pandemic.
Source: http://wintrademarkets.com/
