US equity markets closed sharply higher yesterday as the Trump administration signalled it was looking into possible tariffs on steel imports, Treasury Secretary Mnuchin suggested major tax reform was close and Q1 earnings remained in focus.
Accendo Markets Analyst, Mike van Dulken commented – “The Tech-focused Nasdaq was the biggest beneficiary of the economic chatter yesterday, closing 0.9% stronger, while American Express closed up 6% after strong Q1 results, helping the Dow Jones to climb over 170pts, and a range of other corporate results lifted the S&P 0.8% higher.”
The US Dollar has traded relatively higher against its peers over the past 24 hours with investors currently focused on Europe and, in particular, the French elections.
ADS Securities Analyst, Konstantinos Anthis suggested – “This lack of fresh news from the States has driven a lot of traders to look for a technical bottom in Dollar’s recent decline. The US currency appears oversold at this time with technical studies suggesting that a pullback is due but the hesitant price action over the past couple of days has something to say. It appears that technical indications alone are not enough for investors to go long on the Dollar; some kind of fundamental catalyst is needed to drive this correction further and investors will look towards today’s US PMI reports to provide the extra backing.
In focus today will be the build up to this weekend’s first round of the French Presidential election and all the potential outcomes, especially in light of last night’s Parisian shooting and its impact on undecided voters.
Mike van Dulken commented – “A Macron (centrist) & Fillon (centre-right) win would likely be the most palatable for financial markets. A Le Pen (far right) & Mélenchon (far left) result would surely raise alarms. Markets look to be pricing in something between the two with Macron & Le Pen progressing to the second round in a fortnight’s time, although the last year of global political events has taught us to expect the unexpected.”
Also in the spotlight will be the release of the Eurozone Manufacturing and Services PMI.
Konstantinos Anthis noted – “Recent positive performances in the Euro area should translate into a steady reading for the PMIs this month. It will be interesting to see whether traders will look to buy the Euro on the back of any potential figures from the PMIs or instead seek to minimize their exposure on the Single currency ahead of the uncertain French elections on Sunday. A technical break below the 1.0700 support should expose the 1.0675 and 1.0640 levels.”
While the UK’s Retail Sales report from last month is expected to contract after last months reading. Anthis added “The UK currency has climbed significantly after PM May’s decision to call for snap elections forcing a lot of traders to exit their short positions on the UK currency but today’s report might allow for some short-term correction lower.”