It's a quiet trading day but we're carrying over the themes from last week with the dollar keeping lower for the most part while equities are looking to extend the bounce from last week.
I categorised last week's move as that of markets looking for some breathing room after the moves from April to early May. That largely applies to major currencies and stocks. But it is the bond market that holds the key.
As things stand, we've gotten to the point where the bond market is looking past Fed rate hikes and that was evident as pointed out last week here. In a sense, we have priced in 'peak hawkishness' by the Fed - at least per the current communique. But as recession risks start to creep into the picture, that's perhaps a cause for repricing or at least a reason to reassess. I shared some thoughts on that with regards to the dollar here.
For now at least, we're arguably just settling into a bit of a breather after the surging moves since the start of April. The dollar is weaker again today as we continue last week's form (it is a US holiday today, so there might be little conviction to switch things around). EUR/USD remains on course to hit 1.0800, which may offer a bit more resistance considering it has been a previous contention point technically:
Meanwhile, GBP/USD continues to keep above 1.2600 and is in search of a firm daily break above the 4 to 5 May highs at 1.2634-38. The daily close today will be one to watch to see if buyers can stick with a stronger upside move in the days to follow.
Elsewhere, AUD/USD is taking aim at 0.7200 as buyers extend the retracement momentum and may be looking towards the 100-day moving average at 0.7230 next:
Only the yen and franc - marginally - is weaker than the greenback today as we see a more risk-on mood take hold in markets.
European equities are posting solid gains with the Eurostoxx up 1.0%, DAX up 0.8%, and CAC 40 up 0.9% currently. Meanwhile, S&P 500 futures are up 1.1%, Nasdaq futures up 1.5%, and Dow futures up 0.8% after the cash market snapped their run of losses last week.
