Stronger USD, Bearish EUR/JPY – Focus Shifts On The E.U. Summit

The U.S. dollar escaped higher this week on the back of promises from the U.S. administration to invest even more into long-term projects designed to sustain the economic recovery. So far, the U.S. aid this year totaled $1.9 trillion, but another $3 trillion is on the pipeline for long-term infrastructure projects. 

Because of the speed, America is moving ahead and the lack of reaction from other jurisdictions, market participants turned to the dollar as the currency that will reflect the future strength of the economy. With inflation picking up and the Fed already seeing one rate hike in 2022, the odds favor more dollar strength.

As such, the U.S. indices corrected yesterday. The Dow Jones settled at 32,490, the S&P 500 at 3,920, and the Nasdaq 100 above 13,100. Still, all indices are close to all-time highs, and the path of least resistance remains the upside.

In Europe, the Spanish index opened the day down 0.7%, the German Dax, while remaining bid, opened lower a half a percent, and the FTSE100 is seen flat at the time of writing this article.

Oil had another bad day yesterday – it settled below $58 and recovered some of the losses in the meantime. Gold and silver remain bid, while copper holds comfortably above the $4,000.

Daily Analysis

The day ahead will bring the second part of Fed’s Chair testimony, but the event is unlikely to create much of a fuzz. Typically, it is the first part that matters for traders, as the day to follow the Fed Chair’s words are more or less the same.

In the meantime, the European PMI’s were released and the German ones were surprised to the upside – both the services and the manufacturing sector. Also, in an encouraging sign, the employment in the French manufacturing sector rose to pre-pandemic levels.

Traders should keep in mind the main event for Europe and the common currency this week – the E.U. Summit scheduled to start tomorrow.

Markets to Watch

FTSE100, EURJPY, GBPUSD – markets in focus today.

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Disclaimer: None of the content in this article should be viewed as investment advice or a recommendation to buy or sell. Past performance/statistics may not necessarily reflect future ...

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