Asian stocks were mostly higher in thin trading on Monday, with most markets still closed for Easter holidays including European exchanges. UK prime minister Boris Johnson to announce next steps out of lockdown later today. He also said everyone in the country will be able to take a COVID-19 test twice a week amid economy reopening.
In general, risk sentiment remains broadly positive following strong US jobs data revealed on Friday. According to the U.S. labor department, nonfarm payrolls surged by 916,000 jobs last month, the biggest gain since last August. As a result, the two-year U.S. Treasury yield rose to 0.186% while yields on 10-year bonds climbed to 1.725% earlier on Monday amid rising expectations that the Fed to look into tapering its bond buying this year.
U.S. stock futures extend gains after Friday’s encouraging jobs report, with the Dow Jones Industrial Average futures being up more than 0.6% Sunday night. For the week, the S&P rose 1.2%, the Dow Jones Industrial Average gained 0.2% and the Nasdaq Composite advanced 2.6%.
In currencies, the dollar is trading in a mixed manner on Monday. Despite the retreat in some currency pairs, the USD index stays strong and elevated in general as the greenback derives support from the outperformance of the economic recovery in the United States, especially amid fresh lockdowns in some European countries. Against this backdrop, EURUSD continues to target the 1.1700 area following failed attempts to challenge the 1.1800 barrier last week. The pair will likely stay on the defensive these days, with the immediate support coming at 1.1740.
Meanwhile, the GBPUSD pair surged above the 20-DMA in recent trading, extending gains to two-week tops around 1.3870. In part, this is due to the fact that the risk-on mood has somehow undermined the safe-haven USD. At the same time, the dollar downside seems limited, warranting some caution for bullish traders in sterling. At the same time, the cable has been supported by the highly successful vaccination distribution program and the gradual reopening of the UK economy.
Elsewhere, oil prices are back under pressure after failure to hold above the $64 figure earlier in the day. Brent crude has been staying under the 20-DMA since March 18, and the upside potential will likely remain limited in the coming days amid rising uncertainty over recovery in energy demand in Europe. On the positive side, Saudi Arabia raised prices for oil shipments to customers in its main market of Asia. As a reminder, last week, the OPEC+ cartel agreed to boost daily crude production by more than 2 million barrels between May and July.
Nathan Lambert, Head of Global FX Analytical Department