Markets Rally on Risk-On Outlook, Dollar Weakens Slightly As Euro Rebounds

Markets Rally on Risk-On Outlook, Dollar Weakens Slightly As Euro Rebounds

The US dollar started May with slight gains against major currencies but declined against commodity currencies. The ISM Manufacturing PMI is seen as the first hint of nonfarm payrolls, and EZ numbers are also interesting despite the weekend in Europe.

Markets seem to have returned to moderate risk in Europe, ignoring the sell-off in Asia. US futures also opened with some stability as record gains may resume this week. Foreign exchange markets are relatively heterogeneous. The yen is stabilizing during the American session after the previous sell-off. The dollar is also weakening at the moment. The Swiss franc is the weakest, followed by the yen. Sterling is the strongest, followed by the Australian.

Strong data on the gross domestic product, personal income, and personal spending in the US last week supports the dollar’s bid against the euro, pound, yen, and Canadian dollar as WTI crude fell to around $63. The dollar remains in demand despite the decline in Treasury yields, with the yield on 10-year bonds falling to 1.63%.

US ISM Manufacturing PMI is set to surpass a record 64.7 in April, indicating strong manufacturing activity. The publication serves as a hint at Friday’s important non-farm employment report.
Euro Bounces Back Supported by Strong German Retail Sales
EUR/USD is recovering slightly today, but the overall outlook has not changed. The consolidation pattern from 1.2149 may continue. Although the euro remains in positive territory. In the North American session, the EUR/USD pair is trading near the 1.2050 zones, gaining 0.43% over the day.

Germany, the eurozone’s largest economy, was impressed by its March retail sales report, which broke consensus. The 7.7% rise, following a 1.2% rise, easily beat the 2.9% forecast. This was the highest increase in 10 months and indicates an increase in consumer demand.

The eurozone manufacturing PMI closed at 62.9 in April, up from 62.5 in March, the highest since the record began in 1997. Markit noted significant growth in sales and new orders. But delivery times have increased at an unmatched rate, which has contributed to the rapid rise in prices. Looking at some countries, the Netherlands (67.2), Austria (64.7), and Italy (60.7) were all at all-time highs. Germany (66.2), France (58.9), and Spain (57.7) were also strong.

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Author : Azeez Mustapha

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Azeez Mustapha is an experienced author, trader, markets analyst, signals strategist, and funds-manager.