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Stocks and Dollar Higher as Tensions Ease

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US Equities

US indices traded near three weeks high yesterday, as trade war woes and geopolitical tensions eased. Investor’s sentiment was boosted as no escalation was seen. Moreover, President Trump revealed that new tariffs between China and U.S might not take place after the positive remarks from the Chinese President Xi on Tuesday. Now the focus will be on the earnings season, as US firms are expected to top estimates due to the strength of the US economy.

USD

The dollar rose for the first time in a week against major currencies, the dollar index which measures the strength of the greenback against basket of currencies retraced 50% of the losses posted in the past five days. As for today, we await the Michigan consumer numbers along with JOLTS job openings.

EUR

Euro drifted lower against dollar and pound, as the minutes of the European Central Bank meeting showed that the members are monitoring cautiously the latest moves in EUR, they agreed that there is no enough evidence on the sustainability of inflation, and downside risks will rise with trade conflicts. The EUR dropped to the lowest levels since June 2017 against the British Pound, as the tone of the Bank of England is seen more hawkish then the ECB’s.

GBP

The British pound traded at the highest in two months against the dollar, targeting the highs of 2018. The cable was the best performer yesterday against major currencies, as investors bullish sentiment is boosted by the expectation of an interest rate hike in May. Next week, traders will be waiting for employment report from the United Kingdom, which might show when the Bank of England will be raising rates.

JPY

The Japanese Yen weakened against the United States Dollar to reach the lowest in six weeks. The demand for the JPY declined alone with the reduction of trade war and geopolitical tensions. Moreover, the economic outlook of Japan is still favoring an easing monetary policy stance, as the inflation is still well behind the Bank of Japan’s price target.

GOLD

Gold prices retreated from the 2018 highs as the risks of Military strike against Syria lessened. The gold is trading back in the middle of the consolidation area of $1300-$1370 awaiting any new developments that will favor risk-off trading.

OIL

Oil prices edged lower as president Trump tweeted that a “Syria strike could be very soon or not soon at all”. Oil is still trading at the highest since 2014, and is set to end the week with biggest weekly gains in more than eight months. Oil will be vulnerable to any deterioration in talks over Syria and reintroduction of sanctions on Iran.

The most important economic events:

GMT Country Event Expectation Previous
9:00 EU Trade Balance (Feb) 20.2 19.9
12:00 US FOMC Member Rosengren Speaks    
13:00 US FOMC Member Bullard Speaks    
14:00 US JOLTs Job Openings (Feb)  6.110  6.312
14:00 US Michigan Consumer Sentiment (Apr) 100.6  101.4 
17:00 US U.S. Baker Hughes Oil Rig Count   808

                                 

Disclaimer
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