A quiet start for Europe expected with sluggish Asian markets
WWhile the Nasdaq and S & P500 set new records last week, the Dow and Russell 2000 lagged somewhat, as did the European markets, although the FTSE100 was able to reverse any losses from the previous week.
As we move towards the end of the month and the end of the quarter, it is worth noting that so far in 2021, the stock markets appear poised to end 5 consecutive months of gains, since the modest losses seen in January, with markets here in Europe set for a quiet start this morning, with Asian markets falling and Hong Kong markets delayed by a torrential rain warning.
It would appear, at first glance, that investors have regained some of the confidence that was briefly lost in the aftermath of the Federal Reserve’s most recent policy decision, although there has been a noticeable shift in the end. the shortest part of the yield curve, with 2-year and 5-year rates rising sharply, with the rise in the 2-year rate being particularly noticeable, reaching its highest levels since the end of March 2020.
The brief spike in the US dollar we saw following the Fed’s policy move appears to have subsided as concerns about the timing of US monetary policy were assuaged last week by Fed Chairman Jay Powell and New York Fed Chairman John Williams.
The general narrative that emerges from the events of this week is that while St. Louis Fed Chairman Bullard and Dallas Fed Robert Kaplan have some idea of how the Fed will need to act in the months to come. to come is the opinion of the holy trinity. of Jay Powell, Richard Clarida, and John Williams who probably carry the most weight, and so far the Fed isn’t changing a thing.
Another thing that emerged from John Williams’ comments last week was concern about the job market and the lack of a rebound in the participation rate, despite record vacancy rates. If Williams is concerned about this, he’s unlikely to be the only one, which makes this week’s U.S. Jobs Report even more important when it comes to trying to read the reaction function of Fed officials in the coming months. Williams is scheduled to speak again later today at a virtual panel hosted by the Bank for International Settlements.
The pound had a disappointing weekend on Friday after the Bank of England’s surprisingly conciliatory message surprised many. A slightly more positive rotation was expected, even taking into account the disappointment that restrictions were not relaxed as planned on the 21st June. There does not appear to have been much reaction to the resignation of UK Health Secretary Matt Hancock over the weekend and his replacement by former Chancellor of the Exchequer Sajid Javid.
This is probably explained by the fact that nothing politically wise is likely to change, with the next deadline of 19e July, the next key date to focus on. There is little or no chance that the 5e The July date seen as a possible earlier date will occur given the current rising infection rates in the north of England and the government’s current cautious approach.
EURUSD – continues to remain fairly well supported above the 1.1850 area, with the 200-day MA at 1.2000 the next upside obstacle. Last Monday’s key reversal needs confirmation on a move through 1.2000 towards 1.2080 Below 1.1840 suggests a move towards the 1.1704 level.
GBPUSD – still feels like he wants to go higher, with the 1.4000 level as the key resistance. A break above 1.4020 opens a move towards 1.4130. We have support at 1.3870. A break below 1.3780 suggests the potential for a return to 1.3670.
EURGBP – climbed back to the 0.8600 level at the end of last week, but failed to continue. Although below the 0.8600 level, the bias remains for a return to the 0.8530 area and last week’s low. Below 0.8530, the 0.8480 level opens.
USDJPY – find resistance just below the 111.20 level for now, which could see a return to 110.20 in the meantime. The uptrend remains intact above the 110.00 trendline from this year’s lows. A move below this support opens a return to the 108.60 area.