Dollar Weakness Prevails as the Market’s Hit Pause

We may have expected a move through the European open this morning, but alas, the Dollar is treading water with the Dollar Spot Index flat at the time of the report.

It’s not completely risk off with the Yen in positive territory against the Dollar and the EUR holding its ground, geo-political risk continuing to hold the markets in a holding pattern.

There was some overnight relief that North Korea had held back from another missile launch attempt, pushing U.S equities north, which has filtered through to European markets this morning, with market expectations on earnings driving the markets and financial stocks north off the back of the recent uptick in yields.

We have yet to see the markets begin to panic over the French elections as outlined in yesterday’s report, but with the safe havens standing their ground, it certainly looks like riskier assets are ready for a move, direction driven by an array of factors, earnings season perhaps coming at the right time.

Macroeconomic indicators continue to point to improving market conditions and outside of a Le Pen or Melenchon victory, or North Korea missile strike, the laws of gravity are likely to continue to be defied over the near-term.

The ultimate disappointment will be the continued delay in the U.S administration’s rolling out of tax reforms, which is expected to then be trumped with a fiscal stimulus package.

Disappointment has held the Dollar back and is likely to continue to peg back the Dollar over the near-term, while monetary policy remains Dollar positive as the ECB, the BoJ and the BoE look to grip tightly to neutral positions.

The economic calendar is on the lighter side today, with no material stats scheduled for release out of Europe to provide the markets with any further indicators.
Stats out of the U.S are limited to March housing sector and industrial production figures, which should provide the Dollar with some upside late through the European session, despite the current apathy towards the Greenback.

It’s time for the markets to get a reboot for direction, the only question now being whether the catalyst will be from conflict or a relief rally before settling back down to focus on fiscal and monetary policy over the short to medium-term.

Dollar weakness will likely prevail through the day ahead of today’s stats, with market risk aversion supporting the EUR, which is up 0.08% at $1.0652.

While the European markets maybe reaping the overnight rewards from the rally in U.S equities, the FTSE100 sits deeply in the red at the time of the report, down 0.91%, the upside in the pound weighing on multinationals, with crude and commodities providing little support, despite the defensive Dollar.

While U.S futures are suggesting a reversal to Monday’s gains, the markets will continue to be driven by earnings sentiment through the U.S session, with plenty of caution in the days ahead.

It’s certainly not the time to be taking long positions with so many factors to consider, but we can expect the days ahead to begin driving the next cycle for equities and currencies, with Trump firmly in control of the Dollar.