Sentiment broadly improved into the end of last week as the Dow Jones and S&P 500 pushed higher. The haven-linked US Dollar trimmed gains as the similarly-behaving Japanese Yen followed suit. The growth-oriented Australian and New Zealand Dollars outperformed. Even crude oil prices managed to capitalize on investors’ optimism despite record-dismal non-farm payrolls.
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That the latter is now seemingly following market mood underscores hopes that economies around the world are gradually moving towards easing lockdown measures. A resurgence in travel as businesses begin reopening could have the scope to alleviate surpassed demand for energy. This is also as US-China trade war fears appeared to have been cooling over the past 5 trading sessions.
The markets shrugging off disappointing economic data – at least for the time being – likely shows that traders are looking to the future. Central banks from Australia to England highlighted last week that mind-boggling declines in GDP could be reversed in 2021. Though they also acknowledged uncertainties around the speed of a recovery depending on how the virus unfolds.
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Similar rhetoric could be due from the Reserve Bank of New Zealand ahead. It is unclear how much scope there could be for data to materially shift Wall Street’s trajectory for now. US retail sales and consumer sentiment are due at the end of the week. Yet, traders should also acknowledge the reduced urgency for more stimulus. Growth in the Fed’s balance sheet has been slowing.
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