The dollar is clinging to the lower end of the extended trading range
Asian stock markets gained on Monday, with MSCI’s broadest index of Asia-Pacific shares outside Japan adding nearly 2% amid broad-based optimism at the start of the week. The regional markets surged to three-week highs after China said it is scaling back on lockdown measures in Shanghai and Beijing, with the former also introducing measures to bolster the local economy. Against this backdrop, Chinese yuan advanced to one-week highs, also supported by a weaker dollar. At the same time, Moody’s has lowered China 2022 GDP growth forecast from 5.2% to 4.5%, citing the pandemic. On the positive side, however, the agency expects a pick-up in fixed-asset investment in the second half.
In Europe, equities opened in positive territory as risk demand persisted across the globe. The pan-European Stoxx 600 added 0.7% in early trade, with tech stocks leading the gains. Markets in the US are closed Monday for the Memorial Day holiday. Market volatility could pick up during the week, especially as US President Biden meets with Federal Reserve Chair Powell on Tuesday. Furthermore, the US NFP employment report is due on Friday. The data could affect both the dollar and stocks in the context of the outlook for Fed’s monetary policy.
On Monday, the USD index is back under pressure, lacking demand amid widespread risk-on demand. The buck is holding around 101.50 during the early European hours, clinging to the lower end of the extended trading range. Should investor sentiment deteriorate, however, the US currency may regain the upside bias to regain the 102.00 mark. EURUSD trades marginally above the flat-line, refraining from challenging the 1.0800 level despite a weaker USD.
Elsewhere, gold prices bounced off the 20-DMA to turn positive on the day after last week’s modest gains. The precious metal is oscillating around $1,860 while holding off last week’s highs registered in the $1,870 zone. On the downside, the directionless 200-DMA, currently at $1,840, remains in the market focus. This moving average has been acting as support zone since a strong bounce on May 19, so the near-term outlook for the bullion remains upbeat wile above the 200-DMA.