- The US dollar regains the selling pressure of the early hours of Monday, following the strengthening of US retail sales.
- Investors are betting on the dollar again after American exceptionalism.
- The US Dollar Index is back at 106.00.
The US dollar (USD) reacted strongly at the start of the American session on Monday, after US retail sales exceeded expectations. The dollar faced some selling pressure on Monday morning with markets away from safe haven elements after Iran said it has no intention of further escalating tensions in the Middle East. Now the markets are digesting all the data to assess whether the US Dollar Index will retest this year's highs.
Regarding economic data, business inventories are the only data left to be published for this Monday. For his part, the president of the New York Fed, John Williams, declared on the Bloomberg television network that the recent US Consumer Price Index (CPI) was not a turning point for the Fed to propose a change of position. This view could be key ahead of US Fed Chairman Jerome Powell's speech on Tuesday.
Daily Markets in Review: Bright US Retail Sales Figures
- Most of the US data has already been published:
- The New York Empire Manufacturing Index for April went from -20.9 to -14.3, disappointing expectations of a -9.
- The US Census Bureau has released retail sales for March:
- Retail sales rose from 0.6% to 0.7%, with an upward revision from February's 0.6% to 0.9%.
- Retail sales excluding transportation rose from 0.3% to 1.1%, while February's 0.3% was revised to 0.6%.
- At 14:00 GMT the business inventories for February will be published. Markets expect a 0.3% increase from the previous month.
- At 15:30 GMT, the US Treasury will auction 3- and 6-month bills.
- In Europe, stocks are trading higher and the German Dax is up more than 1%. US stock futures are also trading higher, up more than 0.50% before the market open.
- According to CME Group's FedWatch tool, expectations of a Fed pause at the May meeting stand at 97.4%, while the odds of a rate cut stand at 2.6%. The odds of a rate cut in September have increased and are now higher than those of a cut at the June meeting.
- The 10-year US Treasury yield is trading around 4.56%, modestly above this week's opening price of 4.53%.
Risk Sentiment FAQ
What do the terms “risk-on” and “risk-off” mean when referring to sentiment in financial markets?
In the world of financial jargon, the two terms “risk appetite (risk-on)” and “risk aversion (risk-off)” refer to the level of risk that investors are willing to bear during the investment period. reference. In a “risk-on” market, investors are optimistic about the future and are more willing to buy risky assets. In a “risk-off” market, investors begin to “play it safe” because they are worried. for the future and, therefore, buy less risky assets that are more certain to provide a return, even if it is relatively modest.
What are the key assets to follow to understand risk sentiment dynamics?
Typically, during periods of “risk appetite”, stock markets rise, and most commodities – except gold – also appreciate as they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials strengthen due to increased demand, and cryptocurrencies rise. In a “risk-off” market, Bonds – especially major government bonds – rise, Gold shines and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar benefit.
Which currencies strengthen when sentiment is “risk-on”?
The Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD) and minor currencies such as the Ruble (RUB) and the South African Rand (ZAR) tend to rise in markets where there is “appetite for risk.” This is because the economies of these currencies rely heavily on commodity exports for their growth, and these tend to rise in price during periods of “risk appetite.” This is because investors anticipate higher demand for raw materials in the future due to increased economic activity.
Which currencies strengthen when sentiment is “risk averse”?
The major currencies that tend to rise during periods of “risk aversion” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The Dollar, because it is the world's reserve currency and because in times of crisis investors buy US public debt, which is considered safe because it is unlikely that the world's largest economy will go into default. The Yen, due to the increase in demand for Japanese government bonds, since a large proportion is in the hands of domestic investors who are unlikely to get rid of them, even in a crisis. The Swiss franc, because strict Swiss banking legislation offers investors greater capital protection.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
