Weekly Market Update 21 May – Positive economic data and crypto sell-off put the US Dollar back in focus

1. While USD was sold through the week due to various factors such as stocks rallying and lower Treasury yields, it rallied at the end of the week. This was due to the juxtaposition between the consistently improving US economic data against the uneven global data such as Eurozone, UK and Australia, as USD became a comparatively more attractive currency to hold. The sell-off in cryptocurrencies contributed to the flow of funds towards the safety of the greenback as well.

2. Eurozone private sector activity grew at a much faster rate in May, handily beating market expectations with economies continuing their re-opening efforts. However, reports show that the input cost rose the most in a decade with prices charged increasing at a record pace, signalling signs of rising inflationary pressure.

3. For Australia’s economy, the service sector activity slowed in the month of May, negating the effect of the strong increase in retail sales even as the country’s economy continues to recover. Despite stronger credit card spending, NZD followed AUD lower. No changes to interest rates are expected during the RBNZ meeting in the coming week, however they are prepared to tighten lending restrictions further as housing prices show no signs of easing.