US Open Note – Dollar retreats and US futures take a breather as risk tone improves



Dollar slips to fresh three-week lows

The US dollar is getting pressured lower across the board today despite the rising US Treasury yields as the broader risk-on mood in markets is undermining its safe-haven demand. This optimism was also reinforced by US President Joe Biden’s statements regarding the potential easing of the existing US-China trade tariffs. Nonetheless, this positive development was overshadowed by China’s announcement that the US should not underestimate its resolve on Taiwan, flexing its military muscles and reminding investors that geopolitics remain a key market theme.

Euro rebounds after Lagarde’s hawkish remarks

On the other hand, the Euro is gaining today as the raft of hawkish remarks by many ECB policymakers was also endorsed by President Lagarde, who hinted at a rate hike in July, closely after the end of the Bank’s QE program. Moreover, she also suggested that interest rates might be in the positive territory at the end of Q3 but ruled out a 50 basis points rate increase, indicating that this move could cause panic in the stock markets. Last but not least, the uptick in the German 10-year Bund yields added more fuel to the single currency’s upside impulse, as did the stronger-than-expected German IFO business climate index for April.

Cyclical currencies shine; safe havens struggle

The commodity-linked currencies such as the loonie, kiwi and aussie are trading higher on the day, capitalizing on higher oil prices, the improving risk tone and dollar weakness. Also, hawkish signals from the RBA and RBNZ have also benefited their corresponding currencies.

Inversely, safe havens are facing downside pressures from the broader risk-on sentiment.

US stock futures creep higher as optimism returns

Wall Street is set to open higher today even though fears over economic growth outlook and the Russian invasion of Ukraine linger.  More specifically, e-mini futures for the Nasdaq, S&P 500 and Dow Jones are trading higher in the pre-market session, currently gaining 0.9%, 1.1% and 1% on the day, respectively.

Gold and oil gain on weaker dollar

Gold prices have climbed at a fresh two-week high today supported by the weaker dollar, despite higher US Treasury yields and the improving risk tone in marketsFurthermore, WTI futures are edging higher boosted by the tight supply outlook and weaker dollar.

In addition, Bitcoin and most cryptocurrencies are also gaining today as the broader risk-on mood is underpinning risky trades.

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