Hello traders, welcome to Tuesday! Let’s first recap the notable movements from Monday. The week began with a surprisingly strong round of services PMIs across major economies. France, Germany, the eurozone, the UK, and the US all delivered better-than-expected readings, which boosted market confidence. Particularly notable was the US flash services PMI, which came in at an impressive 58.5, signaling continued strength in the American services sector.
Moving to today, we already received positive data from the UK, where the claimant count change came in lower than expected, and average earnings exceeded forecasts. This has fueled the British Pound’s strength, positioning it as one of the day’s strongest currencies. Now, traders are turning their focus to two key events:
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Canadian inflation, where the monthly CPI is expected at 0.1%, a crucial indicator for the Canadian dollar’s trajectory.
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US retail sales, anticipated at 0.6%, which will provide further clues about consumer demand in the world’s largest economy.
Currency Market
The Japanese Yen emerged as the standout performer of the morning session, gaining strength and pushing pairs with the Yen to the downside. This follows a notable period of weakness for the Yen, so today's move signals a short-term reversal. In contrast, Antipodean currencies like the Australian Dollar and New Zealand Dollar are under significant pressure, lagging as the weakest in the market.
The British Pound remains strong following the positive UK data, bolstering sentiment around sterling pairs. Meanwhile, the US Dollar remains broadly neutral ahead of critical retail sales data later today.
Indices
In the equity markets, European indices are showing modest gains, attempting to climb higher after a relatively quiet start to the day. However, US futures are currently trading in the red, reflecting cautious sentiment in early trading. Despite this short-term pullback, the broader trend for indices, especially in the US, remains overwhelmingly positive, supported by strong economic data and investor optimism.
Commodities
Commodities are experiencing a negative session today:
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Gold and Silver are trading at fresh weekly lows, struggling amid a stronger US Dollar and risk-on sentiment in equities.
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Oil, which rallied to local tops last week, has retraced and is now facing renewed selling pressure as traders take profits. The sentiment towards energy commodities remains uncertain, with mixed signals from global demand and supply outlooks.
Summary
To sum up, Japanese Yen strength and Antipodean weakness are dominating the currency market narrative today. European indices are cautiously higher, while US futures trade in the red. In commodities, bearish pressure on gold, silver, and oil reflects a shift away from safe havens and a focus on risk-on assets. With Canadian inflation and US retail sales still to come, traders can expect further volatility as these events unfold.