Holidays in parts of Asia join the hawkish Fed concerns and doubts about China, as well as the geopolitical woes in the West and Middle East, to sour the sentiment early Monday. However, a cautious mood and a light calendar restrict the momentum so far.
Even so, the US Dollar defends the previous gains and exerts downside pressure on the riskier assets like equities, commodities and Antipodeans.
That said, EURUSD remains depressed as traders fail to believe in the European Central Bank’s (ECB) hawkish rhetoric while the bloc’s geopolitics remain jittery. GBPUSD, AUDUSD and NZDUSD also drop whereas USDJPY bulls attack a short-term key upside hurdle. That said, USDCHF and USDCAD portray the US Dollar’s strength whereas Crude Oil and Gold price pare the weekly gains with intraday losses.
Moving on, BTCUSD prints the first daily loss in three while ETHUSD snaps a three-day winning streak amid a slump in the Bitcoin active addresses and the US regulators’ hard stand in the cryptocurrencies.
Following are the latest moves of the key assets:
On Friday, the US University of Michigan (UoM) Consumer Sentiment Index for June and the one-year inflation expectations came in softer than expected and prior. The same renewed concerns about the US Federal Reserve’s (Fed) rate cuts. However, the Fed officials kept defending the latest hawkish dot plot and allowed the US Dollar Index (DXY) to remain firmer on the day and the week, as well as allowing DXY to edge higher early Monday. Among the key Fed policymakers, President and CEO of the Federal Reserve Bank of Minneapolis Neel Kashkari, Chicago Fed President Austin Goolsbee and Cleveland Fed President Loretta J. Mester gained major attention.
Apart from the hawkish Fed concerns, the market’s cautious mood and mixed data from China and grim updates from Europe also allowed the US Dollar to edge higher after a two-week uptrend.
During the weekend, Reuters quoted a Chinese news piece backed by the People's Bank of China (PBOC) to cite the constraints for the PBoC’s further interest rate cuts, both internal and external. The same restricted the Chinese Yuan’s (CNY’s) growth despite the central bank’s defense of the Medium-term Lending Facility (MLF) earlier on Monday. Additionally, the market’s dicey sentiment, mixed data from China and the latest preference for the US Dollar weigh on the Antipodeans and the commodities. That said, China’s Industrial Production eased but the Retail Sales improved for May.
Talking about the risks, tensions between China and the Philippines grew after the Dragon Nation mentioned that a Philippines ship had collided with a Chinese vessel in the South China Sea. On the same line are China’s efforts to tame the equity rout and tame speculations in the markets via more curbs on short-selling.
On a different page, European Central Bank (ECB) President Christine Lagarde flagged a slower move in the headline inflation while saying, “Unless we have a major shock, target is inflation to hit 2% in H2 2025”. In doing so, the policymaker ruled out any immediate rate moves but failed to renew traders’ confidence in the shared currency. Furthermore, the political pessimism in France grows day by day as the latest poll suggests more hardships for the ruling President Emmanuel Macron.
In addition to the aforementioned catalysts, downbeat prints of New Zealand (NZ) Services PMI for June make the NZDUSD vulnerable. That said, the Kiwi pair drops the most among the G10 currency pairs. Following that is the AUDUSD pair which braces for Tuesday’s monetary policy meeting from the Reserve Bank of Australia (RBA) while bearing the burden of the grim conditions in China, the hawkish bias about the Fed and sour sentiment. Elsewhere, USDCAD reverses the previous day’s losses as the firmer US Dollar joins downbeat prints of the Crude Oil, Canada’s main export item, and the dovish bias about the Bank of Canada (BOC).
USDCHF prints the first daily gain in four while bouncing off a one-week low as traders prepare for Thursday’s monetary policy announcements from the Swiss National Bank (SNB). It’s worth noting that the SNB announced its first rate cut ever in the last monetary policy meeting and traders do expect the SNB’s dovish halt this week.
USDJPY justifies softer prints of Japan’s Machinery Orders for April and the market’s lack of conviction in the Bank of Japan’s (BoJ) hawkish bias. Furthermore, the recent rebound in the Treasury bond yields also underpin the Yen pair’s firmer move. On the same line, GBPUSD remains pressured on the lowest level in a month, down for the third consecutive day, as traders prepare for this week’s UK data and the monetary policy announcements from the Bank of England (BoE).
Crude Oil fails to justify the geopolitical woes and hopes of higher energy demand as hawkish Fed bias and last week’s inventory build challenge the black gold buyers. Gold also pares the previous weekly gains, the first in four, by posting the intraday losses amid China woes and the broadly firmer US Dollar.
Alike the week-start momentum, traders are expected to witness a sluggish start of the week amid a light calendar and mixed risk catalysts. That said, ECB President Christine Lagarde and chief economist Philip R. Lane will speak on Monday to determine the EURUSD moves while New York Fed’s John Williams, Philadelphia Fed President Patrick Harker and Federal Reserve Board Governor Lisa Cook will determine near-term US Dollar moves. Apart from the central bank talks, the New York Empire State Manufacturing Index for June will entertain the intraday traders.
May the trading luck be with you!
