A daily summary and commentary of events and factors that affect the global markets, with a particular emphasis on the foreign exchange markets.
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Richard Pontius Foreign Exchange Advisor
The two major events of the week have now come and gone. President Biden formally introduced his $1.8 trillion American Families Plan to a joint session of Congress last night. He noted that America is “on the move again” toward a brighter future for the country. In a similar fashion, Fed Chair Jerome Powell, during a post Federal Open Market Committee (FOMC) press conference, said that the economy was beginning to “move ahead with real momentum.” The President’s plan had been largely anticipated by market participants, but the steadfast commitment by the FOMC to not give any indication that it intended to reduce accommodative measures caught some in the market by surprise. The Fed declared that inflationary pressures are transitory and that it was committed to using its full range of available tools to support the economy. As the Fed sees it, there are still too many American workers who are unemployed at this stage to alter policy.
Today has been met with a decent amount of economic news. Gross domestic product for the first quarter rose 6.4%, largely driven by a surprising 10.7% increase in consumption. Initial jobless claims fell slightly to 553,000 from an upwardly revised 566,000 the prior week, and continuing claims were little changed at 3.66 million. Between today’s data and yesterday’s look ahead at policy, the dollar is lower, driving the euro to two-month highs against the dollar. U.S. yields are higher, as is oil, while gold is lower.
The earnings season continues with a number of large corporations reporting today. Yesterday saw significant results from both Apple and Facebook, bringing technology companies back into focus. While the most recent quarter results were very strong, there are warning signs that shortages in semiconductor chips may well produce negative effects in the days ahead. Apple noted that potential lost sales of iPads and Macs could reduce third-quarter revenue by some $3 billion to $4 billion. Shortages of microchips have already been felt in the auto industry, where pauses in production and reduction of projected sales have been evident.
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