It remains to be seen whether any of the US earnings announcements or US Q1 GDP in the week ahead could further excite markets and allow risk assets to build on gains already accumulated so far this year.
Are Dollar bulls back in town?
Ahead of its 3-day weekend, US stocks edged higher while the Dollar index (DXY) rose above 97.4, after the March US retail sales data saw its steepest climb since September 2017. With jobless claims also dropping to its lowest in nearly five decades, the data shows that consumers in the States are certainly doing their part in growing the US economy.
The recent stream of better-than-expected data, including the surprise narrowing of the US trade deficit in February, have prompted upward revisions to US Q1 GDP forecasts, due a week from today. Further signs that the world’s largest economy is experiencing a cushioned slowdown, could help boost the Greenback, as economic conditions in other major developed countries remain fragile.
Currency spotlight – EURUSD
The Euro slumped by some 0.4 percent and continues to trade near its 1.12 support level against the US Dollar, after Germany’s manufacturing PMI contracted for 4 straight months in April. Thursday’s data announcement appears to justify the German government’s decision to slash its 2019 growth outlook by half to 0.5 percent earlier in the week.
The gloomy numbers out of the EU’s economic powerhouse ensures that the 1.14 level remains a tough resistance line for EURUSD. With the European Central Bank unable to move on interest rates and readying a fresh round of stimulus, markets will wonder if such measures will be enough to offset external headwinds for the Eurozone, including the potential threat of more US tariffs on EU exports.
Focusing on the technical picture, a solid daily close below the 1.12 support level is likely to encourage a decline back towards 1.11.