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The Market Glance for June 4: Effects of the Strengthening Dollar

Asif Imtiaz Jun 04, 2018

Overall volatility in the equity market has gradually declined since the mayhem in March and long-term investors will once again appreciate low-intensity trading this week as only a handful of important economic data will be coming out in the next few days.

After both the U.S. and China moved along to make peace in trading relations, which eased concerns about a full-fledged trade war earlier in May, markets turned bullish. However, its effects will not be visible on the U.S. trade balance figure for April.

Nevertheless, the U.S monthly international trade balance has sharply declined from -$57.70 billion in February to -$49.00 billion in March, but the table may turn in April because the U.S. dollar has drastically appreciated against other major currencies since the middle of April.

There is a sense of aimlessness among large-scale investors partly because although the economy is doing great and we are getting news about decent sales growth and improving margins from the corporate sector, the market is well aware of the looming rate hikes. Perhaps, that’s exactly what the Fed wants, to keep volatility in check and stop the market from moving into bubble territory. So far, that strategy seems to be working.

To sum up, while it’s likely not much is going to happen this week, it’s always a great idea to keep an eye on the overall macro environment.

Check out last week’s Market Glance here in which investors focused on labor participation rates.

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