The US dollar will be in focus today, after rising against its major rivals in the previous session.
Context: The greenback climbed for a third straight session versus most of its rivals on Tuesday, on hopes of the reopening of some regions in the US and virus cases declining in some countries. Investor sentiment was also boosted by better-than-expected services data from the US.
Details: The US ISM’s non-manufacturing index dropped to 41.8 in April, from a reading of 52.5 in March. Despite this decline, the latest reading was much better than the estimate of 36.8. With services data beating expectations, the dollar index gained 0.2% to 99.714 on Tuesday.
New York Governor Andrew Cuomo disclosed plans to reopen some parts of his state, while California Governor Gavin Newsom also eased some restrictions for clothing stores and other retailers for curbside pickup from Friday.
The euro weakened against the greenback on Tuesday after the German Constitutional Court ruled that the ECB’s bond-buying infringed its mandate. The euro traded significantly lower following the news but recovered some losses by the end of the US trading session. The ruling, however, will not impact the central bank’s recent Pandemic Emergency Purchase Program. The euro was trading flat at $1.0838 in the European session today.
The dollar rose 0.7% against the Swiss franc to 0.9721, but was down 0.3% versus the Japanese yen in yesterday’s US trading session.
The greenback has a tendency to rise when the financial markets weaken. However, the US dollar has been moving in tandem with US stocks since the beginning of the coronavirus outbreak in March. Despite the pressure on the US economy, the dollar is still considered a safe-haven asset by investors globally and tends to gain during periods of volatility in the market.
What to watch: With the US dollar moving in-line with equities, investors will be keeping an eye on factors affecting the overall markets. Investors also await the ADP (Automatic Data Processing) employment report from the US. Though the ADP data is not the sole indicator of the Bureau of Labor Statistics’ jobs report, it does provide some idea of the overall condition of employment in the country.
The US private sector is expected to have witnessed massive job losses in April following the coronavirus pandemic. Economists are predicting 20 million job losses in the private sector last month, versus a loss of 27,000 jobs in March.
Other Markets: European indices were trading higher at 9:00 am GMT, with the FTSE 100, German 30 and French 40 up by 1.8%, 1.7% and 2.1%, respectively.