Should US retail sales data disappoint, the greenback will continue to lose ground
US stocks failed to recover on Monday, albeit the overall tone has improved somehow since last week. Major indexes lacked the upside momentum to stage a bounce as recession fears persisted while geopolitical tensions added to investor concerns. Also on the negative side, the data showed that New York state manufacturing activity unexpectedly contracted in May for the second time in three months. The Dow Jones gained less than 0.1%, while the S&P 500 and Nasdaq Composite dropped 0.39% and 1.2%, respectively.
In Asia, however, equities bounced as Shanghai reported three days of zero community transmission, suggesting the authorities could start to start unwinding the lockdown. Leading the gains, Hong Kong’s Hang Seng jumped 3.27% while China’s Shanghai Composite added 0.65%. Australia’s S&P/ASX 200 advanced less than 0.3% after minutes of the Reserve Bank of Australia May monetary policy meeting showed that an argument for an increase of 40 basis points could be made given the upside risks to inflation. Nikkei 225 added 0.42% after Japan announced that it will be conducting “test tourism” starting from later this month.
Following suit, European stocks opened higher on Tuesday, with the pan-European Stoxx 600 adding 1.2% in early deals as market sentiment continued to improve. On the data front, the ILO unemployment rate in the UK declined to 3.7% in the first quarter from 3.8%. Now, market focus shifts towards the upcoming US retail sales report that will set the tone for investors later in the day.
The USD index continues to retreat as risk-on tone dominates markets since the start of the week. The buck derailed the 104.00 mark to find support around 103.75 in early European trade. Should retail sales data disappoint, the currency will lose ground further, but the overall bullish trend remains intact for the time being. EURUSD has been advancing north for the third session in a row, targeting the 1.0500 figure, followed by the descending 20-DMA, currently at 1.0570.