Volatility could pick up eventually, especially as investors start to shift their focus to the latest US inflation reading
Asian stocks were mostly higher on Monday, with the Shanghai Composite index in China gaining 1.28% after the data showed that PMI Caixin for services improved to 41.4 from April’s 36.2. In Hong Kong, PMI for May hit its highest since March 2011. Also, investors cheered the news that Shanghai and Beijing are incrementally relaxing restrictions as the COVID outbreak in China keeps dissipating. Bucking the trend, Sydney’s S&P-ASX 200 shed 0.45% after Australian monthly inflation gauge came in at +1.1% m/m versus -0.1% prior. The Reserve Bank of Australia is widely expected to hike its cash rate again on Tuesday.
European equity markets climbed to start the week, with the pan-European Stoxx 600 adding nearly 1% in early deals while tech stocks rallying 2%. There are no major earnings or data releases in Europe today, which implies that trading volumes could be low in the near term. However, volatility could pick up eventually, especially as investors start to shift their focus to the latest US inflation reading due on Friday. The report could affect both stocks and currencies through the dollar’s reaction.
The USD index keeps oscillating around the 102.00 mark on Monday, trading under some selling pressure amid a modest pickup in risk demand. In the immediate term, the path of least resistance is to the downside for the time being, with the nearest support arriving at 101.70, followed by the 101.30 region. EURUSD regained bullish bias after a dip on Friday, with the euro flirting with the 1.0750 zone in early European deals. Despite dollar’s weakness, the pair is unlikely to make a decisive break above the 1.0800 figure anytime soon.
Elsewhere, gold prices are holding around the $1,850 zone after a plunge witnessed on Friday. During the latest sell-off, the XAUUSD pair derived support from the 20- and 200-DMAs that helped prevent deeper losses ahead of the weekend. Now, the yellow metal needs to regain last week’s highs around $1,874 in order to retarget the $1,900 mark last seen one month ago.