Join Kathleen NOW as we look at the huge market move following the US/ China trade agreement. What's moved, will it continue and whether this heralds a long term shift in market sentiment.
For now, the China and UK trade deals with the US leave the EU conspicuous by its absence in US trade announcements. As mentioned, European stocks are joining in the global rally, as they also benefit from strengthening global growth. The euro is feeling the consequences of the delay in a trade deal between the US and the EU, which seems like it will be a tough slog to achieve. The euro is one of the weakest currencies in the G10 FX space so far on Monday and is down 1.3% vs. the USD. Volatility in the forex space had boosted the euro for most of this year, but now that the dollar is making a comeback, some of those euro longs will get unwound. This is a sign that the market is pricing in a US resurgence, which is USD positive, although we continue to think that strong European stocks could limit euro downside in the medium term, and we would note that the dollar has not recouped all its losses since April 2nd. Whether or not the dollar can sustain gains might depend on whether the dollar index can close above the 50-day sma at 101.90 later on Monday. A break above this level would suggest that momentum remains to the upside for the medium term.
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