Global market sentiment cautiously deteriorated this past week, aiding to rekindle strength in the haven-linked US Dollar. The Dow Jones and S&P 500 – frequent go-to’s for gauging overall risk appetite – declined. An uptake in Treasuries depressed front-end government bond yields, boosting anti-fiat gold prices. Crude oil still managed to find some cautious upside momentum.
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Fed Chair Jerome Powell may have played a role here as he cooled expectations of negative rates out of the world’s largest economy. Meanwhile central banks from other developed countries offered caution for medium-term growth prospects. Likely aiding to deter further losses in equities was the fastest increase in the Fed’s balance sheet in over 3 weeks as it bought corporate debt.
As more countries and states in the US take measures to gradually ease lockdown measures, all eyes remain on the threat of a second coronavirus wave. The longer nations have to remain in lockdown, or perhaps reinstate previous measures, the more expectations of a swift economic recovery may be ebbed. The US is anticipated to see almost 2.5 million jobless claims ahead.
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FOMC meeting minutes and more commentary from Chair Jerome Powell may be closely scrutinized for views on growth. Earnings are also still due for Walmart and Home Depot – US retail giants. About two-thirds of local GDP lays in consumption and retail sales shrunk the most on record in April – and by a large miss.
Outside of the United States, the European Commission is anticipated to update on economic policy recommendations. Japan – the world’s third-largest economy – is expected to shrink -1.1% in the first quarter. The Euro may closely watch incoming German and Eurozone ZEW survey expectations. What else is in store for financial markets in the week ahead?
Banxico has applied another 50 bps cut showing that they have ample room to apply further downgrades
The Euro continues to trade in a narrow range against the US Dollar but a break to the downside is looking more and more likely.
The Australian Dollar has posted impressive gains from this year’s lows, but can they last as the global data cycle sours?
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Gold prices seem torn between the US Dollar and Treasury yields. Upside momentum has been somewhat lackluster since mid-April, will XAU/USD find some meaningful traction ahead?
Sterling support is breaking and the technical outlook suggests that GBP will weaken further in the short-term.
The technical outlook for USD/JPY brings the April high (109.38) on the radar as the exchange rate breaks out of the bearish formation carried over from the prior month.
Gold has been treading water for a few weeks, but is breaking out a bullish wedge pattern that could soon have it testing another important area .