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Market Wrap
Headline trading once again proves to be a tricky thing to do, as yesterday’s risk-off mood gives way to the underlying economic environment of immense fiscal stimulus being pumped into the markets and decent economic data now starting to come through as economies open. It looks like the S&P500 is going to end green for 5th straight week. The DAX and Nikkei both look to be closing this week in the red but off their lows.
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The US session has been a rip to the upside for the US equities markets reversing all of the weak hand’s trade yesterday after the tax proposals from President Biden. Today’s good news comes from the US factory activity data in the IHS Markit PMI’s and the US New Home Sales figures. The USA New Homes Sales figure jumped up by 20.7% to 1021 and the highest reading since August 2006.
The IHS Markit Composite Flash data rose to 62.2 which is the highest recording since September 2014, with the Manufacturing PMI data edging higher than expectations to 60.6 in April. The manufacturing industry in the USA is still having to deal with supply constraints due to bottlenecks caused by the pandemic disruptions, so the sentiment is for this to only confirm higher as the economy opens further. One thing that remains to be seen is whether the input prices can be passed on to the consumers as companies reporting today downgraded their profit guidance citing higher input costs due to inflation.
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The US dollar tested support from the lows printed at the beginning of the week but have not been able to decisively close lower on the H4 yet. The price action is still looking bearish as the weekly candle is looking likely to close at its lows.
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The British pound has not been able to capitalize on the deprecation in the greenback but at the close of the London session was still above yesterday’s low, and looks likely to print a green weekly candle. The UK Markit/CIPS PMI data came in above expectations and other than a bit of scandal in the UK parliament there is little else other than a stronger euro on the back of possible legal action by the European Council around the AstraZeneca vaccine, keeping Cable from rising higher.
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The EURGBP is attempting to take last week’s high and is retracing the year-to-date move, which pivoted at support in the first week of April. The ActivTrader sentiment indicator is showing 61% of traders as bearish this pair and significant resistance is now 160 pips higher towards the 0.888 to 0.890 range. The euro could be rising on the back of increasing good vaccine news and today the EU announces that they are to buy up to 1.8billion doses of the Pfizer-BioNTech’s vaccine as they attempt to catch up with the UK and USA in terms of vaccinations. The UK has currently administered 33.388mln first doses, and the CDC reported that there had been a 10% weekly drop in US cases of Covid-19, which is a hopeful trend.
