The event of the day for the financial markets today may be the publication of a report from the U.S. labor market, including data on changes in employment in non-farm sectors, or NFP - publication at 2:30 p.m. U.S. President Joe Biden is also expected to speak on the matter after the labor market data.
The data may affect both the currency market and the stock and commodity markets, so we will take a look at the situation in these markets. On the forex market, the euro strengthened towards $1.21 on Friday, approaching the previous week's two-month high of $1.215. This came after the release of data that showed industrial production in Germany rose in March by the most since October last year, and foreign trade data signaled a recovery in global demand. In France, industrial activity diverged from market expectations.
The Eurozone PMI survey released earlier in the week also showed that private sector activity grew at a faster pace in April as service activity returned to growth and Eurozone retail sales rose strongly in March despite renewed restrictions. The euro posted a 2.5 percent monthly gain against the dollar in April. The common currency's quotations were supported by optimism about a strong economic recovery and signs of accelerating graft in Europe. However, it is worth remembering that with the exchange rate of the main currency pair at the level of USD 1.22-1.23 not so long ago there were statements of the representatives of the ECB regarding the too strong euro. Therefore, it seems unlikely that these levels will be reached on a sustained basis.
Stock market investors remain optimistic
On the stock market, US index futures are close to record levels, and the Dow Jones Industrial Average has set an all-time high. Another wave of optimism could come to the market with data on the number of weekly applications for unemployment benefits in the US and the latest solid economic data from the world's largest economy.
The yield on 10-year U.S. bonds fell to 1.57 percent on Thursday as Federal Reserve officials downplayed the risk of higher inflation. The Fed's Eric Rosengren said inflationary pressures should be short-lived and should not lead to monetary tightening.
Some arguments for gold price rises
On the commodity market, in turn, it is worth paying attention to gold, which overcame resistance at $1800 per ounce and found itself at the highest level in three months. It seems that the main reason for the rising prices of gold bullion is the increase in inflation expectations in the USA to the highest level since 2006, accompanied by the aforementioned decrease in bond yields and a slightly weaker dollar. Gold may also gain because the specter of faster interest rate hikes has been averted.
Recall that Treasury Secretary Janet Yellen's remarks this week sparked speculation that the Fed may have to cut support earlier than expected to prevent the economy from overheating. However, after clarification on her hawkish comments, markets began to re-price the more distant likelihood of a rate hike by the Fed, which in turn may have encouraged gold buying.
The precious metal also benefited from demand for so-called safe havens due to the ongoing pandemic threat. Infection rates in India and Japan continue to rise. Japan has extended its state of emergency until the end of May.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
77.46% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Trade this news from Conotoxia Ltd. platforms
Go to your account
