Positive data flow from the US and steps taken by the Fed prepared the ground for the dollar to gain strength globally
As expected, the US Federal Reserve (Fed) in May increased the policy interest rate by 25 basis points, setting it at 5.25%. The average hourly earnings data, announced at 0.5%, accelerated pricing in favor of the dollar.
US inflation data, which is a focus of global markets, managed to retreat below the critical 5% band, announced at 4.9%. Nonfarm employment increased with 253K, while the decline in the unemployment rate to 3.4% added momentum to the global value gain of the dollar. Despite the Services Purchasing Managers Index being above the previous level, it remained below expectations at 53.6. The ISM manufacturing purchasing managers index PMI exceeded expectations with 47.1, while the non-manufacturing PMI showed an increase likewise, at 51.9.
The Job Openings and Labor Turnover Survey (JOLTS), continuing its decline to 9,590M, reignited recession fears alongside falling demand. The prolonging of the resolution of the US debt ceiling crisis, ongoing disagreements, and the risk of the country defaulting appeared in news headlines as another critical topic of market focus.
Rate hikes continue in eurozone; inflation still not at desired level
The ECB increased the deposit account rate by 25 basis points to 3.25%. The central bank, which set the marginal borrowing rate at 4%, announced the interest rate decision as 3.75% with an increase of 25 basis points. Despite the interventions, the inflation level came in at 7%, parallel to expectations. Germany’s inflation declined from the previous level, becoming 7.2%.
Positive atmosphere for UK economy months later
Inflation data showed a sharp drop from double digits to 8.7%, producing positive signals for the country’s economy. Manufacturing production was another data point showing a sharp rise at 0.7%. The Bank of England (BOE) continued its series of interest rate hikes with an increase of 25 basis points. The policy interest rate, determined as 4.50% after the decision, began to bear fruit in the battle against inflation. The Services Purchasing Managers Index was announced above expectations at 55.9, while the Manufacturing Purchasing Managers Index remained below the previous level at 47.8.
Data flow in the Asia-Pacific affects direction of markets
The intense data flow in China determined the pricing direction in Asian markets. The People’s Bank of China (PBOC) kept the lowest loan interest rate at 3.65%. China’s unemployment rate produced positive signals for the country’s economy, coming in below expectations at 5.2%. The decline in the inflation rate continued, showing a decrease to 0.1%. Although the industrial production data was above the previous level, it remained below expectations. The Caixin non-manufacturing purchasing managers index was announced at 49.5, falling below the critical level of 50. Election uncertainty continues in domestic markets According to the most recent data announced, the inflation rate reached 43.68%. The PPI data also declined to 52.11%, reflecting on the calendars as another macroeconomic data point. The unemployment rate remained stable at 10%, with no change. The Central Bank of the Republic of Turkey (CBRT) kept the policy interest rate steady at 8.50%. On the eve of the election, declines continued on the Istanbul Stock Exchange front while the dollar/TL exchange rate tested new upward peaks.
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