Global Market Overview

Despite holidays in the UK and U.S. significantly reducing global liquidity, E-minis and European stocks firmed, European yields fell, commodities climbed, and the USD slipped. The overall market sentiment was "risk on," providing a modestly positive lead for Asia.

Asia-Pacific Developments

The China, South Korea, and Japan summit declarations included plans to formalize regular high-level communication and collaborate on climate change, conservation, health, trade, and international peace. Regional data for the day includes Japanese services PPI and Australian retail sales. Additionally, Federal Reserve Bank of Cleveland President Loretta Mester and European Central Bank board member Isabel Schnabel are scheduled to speak at the BOJ-IMES conference in Tokyo.

Market Movements

• E-mini S&P: rose by 0.25%
• Nasdaq e-mini: increased by 0.4%
• STXE 600: up by 0.32%
• European Yields: 10-year bunds fell 4 basis points to 2.546% following dovish ECB comments

Commodities and Currency Movements

Commodities firmed as European yields eased ahead of a busy week for U.S. data culminating with the Core PCE Price Index on Friday. Brent and WTI both rose by 1.1%, U.S. copper by 1.5%, and gold by 0.75%, reflecting positive sentiment. The safe-haven U.S. dollar eased, with the USD index down by 0.15%, limited by positive stock and commodity performance.

• Currencies:
  • EUR: increased by 0.1%
  • GBP: rose by 0.25%
  • USD/JPY: decreased by 0.05%
  • USD/CNH: remained steady
  • AUD: rose by 0.4%
  • NZD: increased by 0.45%
  • USD/CAD: fell by 0.25%

Currency Pair Movements

• EUR/USD: up 0.11%, reflecting a slightly stronger euro amid slipping ECB rate cut expectations
• USD/JPY: decreased by 0.1%, influenced by Japan's renewed push to keep yen bears in check at the G7 meeting and the upgraded factory output view in Japan’s monthly report
• GBP/USD: rose by 0.09%, with the pound finding support despite mixed UK PMI data
• EUR/GBP: edged up by 0.04%, reflecting some relative strength in the euro
• DXY Index: down by 0.07%, indicating a generally weaker dollar

European Indices and Commodities

• European Indices:
  • DAX: up by 0.08%
  • FTSE: down by 0.26%
• Commodities:
  • Brent: up by 0.52%
  • Gold: up by 0.48%

Currency Outlook

The currency outlook suggests continued volatility influenced by economic data and central bank policies. The ECB's potential rate cuts in June, highlighted by ECB's Rehn, and the necessity for restrictive policy into 2025, as stated by the chief economist, are pivotal. German business sentiment remains stagnant, which might weigh on the euro if economic conditions do not improve.

China's industrial profits returning to growth in April amid policy support is a positive sign for the yuan and commodity-linked currencies. In Japan, the cautious approach towards inflation targeting by the BOJ and the upgraded factory output view support a stable yen outlook, though interventions to keep yen bears in check remain a risk.

France's plans to restrict unemployment benefits could impact the euro if labor market tensions rise. Overall, the interplay between regional economic policies and global market sentiment will be crucial in determining the trajectory of major currencies in the near term.