Dollar’s bullish run could see more extensions
Stock and bond trading will resume at normal hours today in the US, as European traders will remain out of the office to celebrate Easter Monday.
Following the stellar NFP release on Friday, the ISM non-Manufacturing PMI for March will probably extend its upward trajectory comfortably within the expansion area at 14:00 GMT, backing the progress outlined by the Markit PMI readings, which will also see their final revision a few minutes before the ISM services number today.
Traders, however, have already acknowledged that the US recovery is optimistically diverging from those in other regions thanks to the progressing vaccination program and the trillions of dollars of fiscal stimulus provided by President Biden. The new $2.25 trillion infrastructure plan unveiled last week may face some resistance from Republicans. But with the European Union and emerging economies squeezed by new lockdowns and the slow pace of vaccinations, which may consequently lead to additional political dramas, the US may keep magnetizing investors’ confidence despite the issue of tax increases, maintaining support under the US dollar.
Hence, although dollar/yen is stable today around the 110.84 barrier, there is a good reason to follow its robust bullish trend, especially as US Treasury yields keep over-performing, making other bonds and gold less attractive. Gold is currently shaping a bullish double bottom pattern on the daily chart, though the path higher could be rocky and long for a trend reversal.
In other commodities, crude oil prices were down by almost 2.0% as copper was soaring by 2.91%. The Canadian dollar, managed to post gains against the greenback despite the sell-off in oil.
Futures tracking the S&P 500, Nasdaq and Dow Jones are currently pointing to a mildly positive open on Wall Street after a long weekend.
Boris Johnson to continue reopening phase
Elsewhere, the British Prime Minister is scheduled to reveal the Step 2 of the reopening phase later today, likely allowing restaurants, pubs, and non-essential shops to resume operations under capacity controls while opening the taps for international travel and Covid passports. The outlook for the UK economy remains in the green zone as the vaccination program has been outpacing the rest of Europe, though some caution is warranted as the blood clotting symptoms from the AstraZeneca/ Oxford injections are closely watched despite the country fully implementing the jab.
Pound/dollar climbed slowly to a two-week high of 1.3867, while euro/dollar was struggling to extend last week’s rebound above 1.1758. Euro/pound continued to sail southwards in the absence of any obstacles, unlocking a new one-year low of 0.8471.
RBA to stand pat on policy
During the early Asian trading hours, the Reserve Bank of Australia will announce its policy decision at 05:30 GMT but policymakers are unlikely to change their accommodative strategy although the heavy intervention in the asset purchase program last month signaled that the global bond sell-off crossed a red line for RBA. The rising commodity prices and the low infection numbers provide some footing for the aussie, though with the pace of vaccinations lagging those in other key economies, downside risks remain in the background for the currency. Technically, a decisive close below the 0.7600 – 0.7550 area could spark the next bearish cycle against the greenback.