The USD moved higher from a test of 2021 lows, equity markets continued to recover, Gold and Oil market remained biased higher as economic data remained broadly positive, all ahead of NFP Jobs Day on Friday.
The start of the new month and the trends continue: the Dollar remains weighed but recovers from lows, Commodities dip as USD picks up and Equities continue to recover. Data this week has been solid with PCE, PMIs and CPI all broadly positive so far. Jobs dominate, with ADP, Weekly Claims and the key NFP data still to come.
Unemployment remains very much in focus. The weekly US unemployment claims are trending lower, and last week’s 406,000 was another new pandemic era low, with 400,000 expected this week. The ADP data is expected around 645,000, the unemployment rate is expected to move lower to 5.9% and the headline NFP number is expected at 664,000.
The vaccine rollouts continue to drive sentiment, but the virus variants remain significant. The US and UK continue to lead the vaccine rollouts, however the situation in India remains very significant and new lockdowns have been implemented in countries from Malaysia to Australia.
This week FX volatility continued as the USD moved up from a test of 2021 lows last week. The USDIndex is struggling to break over 90.00 but is up from 89.50 lows. EURUSD dipped to 1.2130, rallied to 1.2250 and rotates around 1.2200, USDJPY broke over 109.00 and even breached 110.00, but 109.00 remains key, and Cable rallied to as high as 1.4245 and a new 3-year high but could not hold 1.4200, with 1.4100 remaining key.
Global stock markets recovered from the inflation fears spike lower and consolidated. The rotation from tech stocks to cyclicals was clearly demonstrated during May as the USA100 lost 1.53%, whilst the USA30 gained 1.94%. The USA500 holds over 4,200 this week ahead of NFP.
The Gold price continued to rally this week, peaking over $1916. The technical $1875 is key support and $1925 the key resistance area. Psychologically, $1900 is key. The wider commodity rally continues, although it has been more volatile this week with large moves for Silver and Copper.
USOil prices rallied to October 2018 highs at $68.60 this week ahead of the OPEC+ meeting, which agreed to maintain production quotas (maintaining supply at sub-capacity levels), despite improving global demand projections. The worry over possible new Iranian oil supplies is diminishing for now.
The yield on the US 10-Year Treasury Note still holds above the psychological 1.50% level and is back over the key support of 1.60%, trading at 1.62% this week, down from last month’s high test of 1.70%.
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Stuart Cowell
Head Market Analyst
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