Risk-Aversion Goes Away for the Day
MAY 05, 2021
The U.S. Dollar is trading in tight ranges but is looking likely to stay subdued, unlike yesterday with a return to risk.
Oil markets continue to improve along with the prices of other raw materials and unfinished components. Subsequently, this is making commodity-based currencies more expensive, particularly in Asia and Oceania. Stocks and futures are attempting a comeback as earnings continue to be released showing more than just signs of corporate survival. Additionally, the sentiment over inflationary growth forcing the hand of the Fed has faded.
This morning the ADP Employment Change figures showed an increase of 742K payrolls when 850K were expected. While the figure is certainly the best since September, it still came a bit short which may make investors wonder about the strength of non-farm payrolls when they come out on Friday. Fed officials Loretta Mester and Charles Evans will be speaking at different events during the day, we will see if anything ties to the comments made by Treasury Secretary Janet Yellen about how interest rates could go up moderately at some point.
What to Watch Today…
- Markit US Composite PMI 9:45 AM
The Euro has not moved much, sticking to its support level as the Euro-zone continues to gradually improve its COVID handling and re-opening. One sad note is that there are reports that the variant inflicting so much pain in India could also spread to Eastern Europe as some developing countries are experiencing a similar rise in infections as India has seen.
With talks in the U.S. about how herd immunity may no longer be achievable, we shall see if the EU population is different and if indeed there will be no more risk moving forward of the continent having to force serious lockdowns.
The Pound is trying to pick up some value after seeing all currencies rise against the buck last month. Sterling has been held back as news items related to post-Brexit trade concerns have discouraged traders. Purchasing Managers Index figures show that the fundamentals of the economy remain OK, but businesses have reported losses in Sales and higher costs dealing with the transnational movement of goods.
Additionally, there is the political worry that the U.K. could face multiple independence referendums down the line as Scotland revives its call for a vote while Northern Ireland wonders if they can separate because of a wish to unite with Ireland. Hard to see clearly where the Pound is heading as the pressures build up.