MARKET NEWS AND CHARTS FOR MAY 25, 2021

EURSEK

The EU’s largest economy fell -1.8% in the first three (3) months of fiscal 2021. This was higher compared to expectations of a -1.7% decline in Q1. The lockdown in the country during the third wave of COVID-19 was the main culprit behind the disappointing data. On an annualized basis, Germany is still -3.4% below pre-pandemic level. The numbers are expected to cause a short-term rally in the single currency as the contraction during the first quarter made the equities market unattractive to investors. Despite this, a recovery is seen in mid-Q2 with May’s economic data for Germany posting better-than-expected results. Business Expectations, Current Assessment, and Ifo Business Climate Index reports all recorded their pandemic highs of 102.9 points, 95.7 points, and 99.2 points, respectively. Analysts expect robust recovery in the EU’s largest economy in Q2 2021 as Germany lifted quarantine measures for foreign travelers who received vaccine shots.

EURCZK

The improving economic outlook for Czechia will send the koruna lower in sessions. The Czech Statistical Office (ČSÚ) published its monthly business confidence report on Monday, May 24. According to ČSÚ, the easing of coronavirus restrictions in the country paved the way for investors’ optimism. The Business Confidence is now at 99.7 points, which was the highest level since coronavirus became pandemic. Meanwhile, Consumer Confidence also increased to 102.8 points from 93.9 points in April. Meanwhile, the Czech Republic government is looking to raise more funds from the European Commission as it transitions to a green economy. Prague announced that it will be shutting the state-owned CEZ’s coal-powered plants until 2030 to achieve the bloc’s target of carbon neutrality by 2050. But Czechia plans to achieve its own target 12 years before the deadline. The additional EU fund could be used to kickstart the country’s economic recovery.

USDHUF

The US equities market will recover from the recent sell-off amid the upbeat reports from the labor market and PMIs. In turn, the greenback will see some weakness as investors transfer their holdings from a haven to riskier but more profitable stocks. On Thursday, the US had its lowest number of unemployment claimant benefits since March 2020 at 444,000. Many analysts are now looking for better non-farm payrolls number in the next two (2) weeks. Meanwhile, the purchasing managers index (PMI) reports are at their highest records to date. The services sector saw the highest figure at 70.1 points while the Markit Composite was up by 4.6 points to 68.1 points. The Manufacturing PMI lags at 61.5 points. Meanwhile, the slowdown in the housing market is a bullish signal for investors and traders as inflation will be slower. The total listing of houses for sale in the US is down to 5.85 million for April from 6.01 million houses in the previous month

USDMXN

An official report from Mexico shows the country expanding 20.6% in April for the preliminary GDP report MoM. This follows Fitch Ratings’ revision on its GDP forecast for Latin America’s second-largest economy. The credit rating agency sees a 5.0% growth for Mexico in 2021 while maintaining its a BBB- grade and a Stable Outlook. As for the recently published report, retail sales jumped by 3.6% in March, which beats the 1.6% estimate and previous record of the same figure. On an annualized basis, the report was up 2.5%… However, a possible downgrade by the US on Mexico’s air safety rating posed medium to long-term risks in the country’s economy. The US is making gradual recovery from the pandemic with expectations of full recovery by Q3. And being America’s neighbor in the south, Mexico will benefit from the reopening of the American economy. Meanwhile the USMCA trade deal could help the North American region to recover.