US Open Note – Dollar rebounds but US futures point down amid prevailing risk-off mood



Dollar bounces back as risk jitters come into play

Today’s trading session started off with a cautiously positive risk mood but that didn’t last for long as risk aversion kicked in, erasing gains in risky assets and boosting safe havens. That said, the US dollar is regaining traction despite retreating US Treasury yields, with the 10-year yield falling to its lowest levels in more than a month, amid increasing worries over slowing global economic growth and the possibility of an upcoming recession. Later in the day, investors and markets will be keeping a close eye on the FOMC minutes for clues about a potential 75 bps increase in June and the reduction of its balance sheet, alongside the Bank’s updated views on inflation and growth.

On the data front, US durable goods orders rose by 0.4% on a monthly basis in April, against the 0.6% expectations. Nevertheless, the greenback remained unchanged after the report.

Euro slides on mixed signals

On the other hand, the euro is losing some ground today even though most ECB members are increasingly adopting a more hawkish rhetoric. Specifically, both ECB policymakers Knot and Rhen supported the view that a 50 basis point hike in July is feasible, while also mentioning that growth projections are expected to be revised lower next month due to the Ukrainian war and other negative global developments.

However, ECB Chief Economist Philip Lane sounded more dovish, suggesting that uncertainty related to the ongoing war OR due to the ongoing war  and the inflation outlook requires a lot of flexibility on the Bank's part. Thus, the ECB is not anticipated to commit to a strict rate hike timeline, but will likely  base any monetary policy decision after Q3 on the subsequent condition of the EU economy.

RBNZ hikes aggressively but Kiwi fails to strengthen

Earlier in the day, the Reserve Bank of New Zealand increased its base interest rate by 50 basis point, with its policymakers stating that the bank is determined to slow down inflationary pressures and restrain aggregate demand. Despite the initial boost, the kiwi did not manage to hold onto its gains, heavily pressured by the stronger dollar.

In other news, the increasing risk aversion seems to be benefiting safe haven currencies with the Japanese yen and Swiss franc appreciating across the board today.

US futures in negative area amid mounting macro headwinds

Wall Street is set to open lower today, extending yesterday’s decline as fears over a slowdown in growth and the lack of positive signs from the ongoing war seem to be driving investors away from risky assets. More specifically, e-mini futures for the Nasdaq, S&P 500 and Dow Jones are down in pre-market trade, currently losing 0.55%, 0.40% and 0.35% on the day, respectively.

In individual stock news, Nvidia reports its Q2 earnings today after Wall Street’s closing bell.

Oil appreciates; gold falls

Oil futures are trading higher on the day, benefiting from concerns over a tighter supply outlook and an uplift in demand after China’s exit from zero-Covid policies. Inversely, gold is on the retreat today, heavily pressured by the dollar’s rebound, while the pullback in US Treasury yields is capping its decline.

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