Risk on in first full trading day of May
Fawad Razaqzada May 2, 2017 11:53 AM
Today marks the first full trading day of the new month. Expect to come across lots of “sell in May, go away” headlines. So far, we haven’t seen any significant selling in the stock markets. If anything, the major indices in the US remain very close to their all-time highs, while in Europe the German DAX has held above its old record high at 12390 while the UK’s FTSE is about 200 points shy of its ATH hit in March. Thus, risk remains firmly on the table for now. As a result, the USD/JPY – yen being a perceived safe-haven currency – along with other yen crosses have been able to climb sharply higher in recent trade.
Today marks the first full trading day of the new month. Expect to come across lots of “sell in May, go away” headlines. So far, we haven’t seen any significant selling in the stock markets. If anything, the major indices in the US remain very close to their all-time highs, while in Europe the German DAX has held above its old record high at 12390 while the UK’s FTSE is about 200 points shy of its ATH hit in March. Thus, risk remains firmly on the table for now. As a result, the USD/JPY – yen being a perceived safe-haven currency – along with other yen crosses have been able to climb sharply higher in recent trade. Among the yen crosses, the EUR/JPY and GBP/JPY have performed remarkably well. In addition to the on-going “risk-on” trade, the market-friendly outcome of the French first round election and the announcement of a snap election in the UK by Prime Minister Theresa May are the reasons behind these yen pairs’ stellar performances. The pound got another shot in the arm this morning by news UK manufacturing output expanded at its fastest pace in three years. According to the official PMI survey, output in the sector rebound strongly to 57.3 in April from 54.2 the month before. A reading above 50 indicates expansion, so this was a great result and bodes well for Q2 GDP. The corresponding data for mainland Europe, released last week, were likewise stronger-than-expected. Today the revised figures showed little change, and as such the euro was able to maintain its bullish bias against the US dollar and Japanese yen, but weakened versus the British pound. With manufacturing PMI figures from both the UK and Eurozone showing growth, this has dampened worries that the impact of Brexit was beginning to bite. But let’s see if the PMI figures from the UK’s other key sectors – construction and services – will revive the worries again. In addition to UK data, there will be plenty of other global top-tier economic pointers to look forward to this week, not least the US monthly jobs report on Friday. What’s more, there will be plenty of US corporate earnings and a Federal Reserve rate decision to provide direction. Consequently, the remainder of this week should be more volatile after a slow start.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.