The US Dollar Index continues to show strength during the last trading session of June, having so far this month climbed more than 2.6%. The greenback is on track to gain the most since March, in a dynamic that can be attributed to the Federal Reserve’s hawkish pivot. The US central bank’s new stance forced a change in perspective amongst traders, with the timing of future interest rate rises becoming their focal point, diminishing the appeal of riskier currencies. Today’s publication of ADP payrolls will offer a preview of Friday’s big release, one which will either reinforce the current dynamic or, if disappointing, give traders more food for thought and increase the resistance to further dollar gains.
Gold remains on the back foot during early Wednesday trading, with the precious metal likely to have its worst month of the last few years. These losses clearly correlate with the strengthening of the dollar, with the markets pricing in the Federal Reserve’s shift to a more hawking stance. In the current context, Friday’s release of non-farm payrolls will be closely followed by gold traders and could either accentuate the current trend or, if the numbers disappoint, offer some support for bullion prices.
Stock markets in Europe fluctuated on Wednesday with tech and healthcare stocks offsetting losses from the travel & leisure sector as fear brought by the Delta variant lingers. However, the risk-on trading stance continues to prevail as investors welcomed another batch of reassuring economic data from the old continent while the ECB keeps on supporting the market. With the impact of the new variant downplayed by most investors amid successful vaccination campaigns, this bullish trading mood is likely to stay alive as long as Christine Lagarde keeps her dovish stance. However, this could change sooner than anticipated if solid macro data continues to pile up in Europe as the ECB, like the Fed, may have to adopt a more hawkish shift to achieve its inflation goals. That said, traders will keep their focus on the EU’s CPI data today, which could bring increased intraday volatility on most European benchmarks.
Pierre Veyret– Technical analyst, ActivTrades
Disclaimer: opinions are personal to the authors and do not reflect the opinions of LeapRate. This is not a trading advice.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.