Balancing Strong Corporate Earnings Against Continuing Frustration Over Failure to Reopen the Strait of Hormuz – Currency Thoughts
Balancing Strong Corporate Earnings Against Continuing Frustration Over Failure to Reopen the Strait of Hormuz
May 22, 2026
This week at least the lack of cheery news on the U.S./Iranian negotiating front was outweighed by proof of continuing heavy investment in AI and overall strong profitability in the tech industries. U.S. equities rose further today. Japan’s Nikkei leaped by 2.7% and was nearly matched by a rebound in Taiwanese equities. Stock markets rose 0.9% in China and Hong Kong, and those in Singapore and Indonesia went up more than 1%. The appetite for risk saw 10-year sovereign debt yields fall 6-7 basis points in Germany, France, Italy, Great Britain and Spain and even a single basis point in Japan. A 1-bp rise in the 10-year U.S. Treasury yield seems out of step.
The dollar strengthened 0.9% versus the embattled Korean won and touched yet another record high of 17,829 versus the Indonesian rupiah. The dollar also went up 0.3% versus the Canadian and Australian currencies, 0.2% relative to the euro and sterling and 0.1% vis-a-vis the yen.
The price of West Texas Intermediate crude oil has risen 1.2% but, at $97.54 per barrel, remains well under recent highs.
On the other hand, Bitcoin’s price is down 1.1%, and gold has fallen 0.9%.
Producer price shockers were reported in Canada, Iceland and Chile. The 12-month rate of increase in the Canadian PPI jumped to a 45-month high of 11.4% in April from 7.8% in March and 5.6% in February. Icelandic PPI inflation jumped to 12.0% from 8.6% in the prior month and -1.5% in mid-2025. Chilean PPI inflation of 17.7% last month was at a 23-month peak. Irish PPI inflation of only 1.4% was up from -0.2% in the prior month and -1.5% at end-2025.
Japanese consumer price figures, in contrast, undershot expectations. The total CPI index in April of 1.4% was its lowest in a year and a half. Excluding energy, the CPI was also just 1.4% and at a 49-month low. That measure of core inflation includes fuel, however. When excluding both food and energy, consumer price inflation decelerated a half percentage point to a 21-month low of 1.9%.
Measures of consumer confidence recovered 3.8 index points in Germany to a 2-month high but still highly depressed reading of -29.3. British and South Korean consumer sentiment also ticked up to 2-month highs this month.
The German IFO Institute’s May monthly survey of business confidence in Euroland’s largest economy recovered 0.4 points but stayed very low at 84.9 following significant deterioration between February and April. IFO officials characterized the latest figures as perhaps “stabilizing” but cautioned that the situation remains fragile. Indeed, the construction sector deteriorated further to a 15-month low.
French business confidence sank half an index point to a 63-month low in May despite slight improvements in both manufacturing and construction. Retail and trade plunged steeply to a reading of 89.5 from 94 in the previous month and 99.9 in March. The employment scene in France fell sharply to a 62-month low.
Belgian business confidence rebounded a bit to a 2-month high from April’s one-year low. Likewise, Turkish business confidence recovered to a 3-month high of 103.3 from April’s 7-month low of 100.8.
The Confederation of British Industries’ monthly industrial trends orders index fell 3 index points further in May to a 68-month low of -41.
Mexican GDP growth in the first quarter has been revised to show a slightly less pronounced contraction of 0.6%, associated with year-on-year growth of just 0.2%. GDP in 2025 had only risen 0.6%.
Two disappointing U.S. economic reports showed 1) a record low reading for consumer sentiment according to the U. Michigan index, which was revised to 44.8 from 48.2 estimated initially and 2) just a 0.1% rise in the Conference Board’s index of leading economic indicators in April following a decline of 0.6% in March.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: French business confidence, German business climate, Japanese CPI, U.S. consumer confidence
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