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Forex Today: Dollar benefits from risk aversion to start the week

Here is what you need to know on Monday, May 9:

The risk-averse market atmosphere is helping the dollar find demand as a safe haven at the start of the new week and the US Dollar Index is sitting at its highest level since November 2002 above 104.00. The Sentix Investors Confidence data will be featured in the European economic docket. There won't be any high-impact data releases from the US on Monday, suggesting that the market sentiment is likely to continue to drive the financial markets.

Reflecting the souring market mood, US stock index futures are down between 0.85% and 1% in the early European session. In the meantime, the benchmark 10-year US Treasury bond yield, which rose nearly 7% last week, is moving sideways above 3.1%. In the Asian session, the data from China revealed that the trade surplus widened to $51.12 billion in April. On a yearly basis, Imports declined by 2% and Exports increased by 3.9% in the same period. 

In a report published over the weekend, the International Monetary Fund said that they were expecting the global growth to be close to the pre-pandemic average of 3.5%. "It still could slow more than forecast, and inflation could turn out higher than expected," the IMF further added in its publication. “This may be most salient for parts of Europe, given their relatively higher reliance on Russian energy imports.”

EUR/USD is edging lower toward 1.0500 in the early European morning on Monday. European Union (EU) Foreign Policy Chief Josep Borrell told the Financial Times on Monday that the EU should consider seizing frozen Russian foreign exchange reserves to help pay for the cost of rebuilding Ukraine after the war. Meanwhile, European Central Bank Governing Council member Olli Rehn reiterated that they may start raising rates in July but this comment failed to help the shared currency find demand.

Following last week's sharp decline, GBP/USD stays on the back foot to start the new week and was last seen trading at its lowest level since June 2020 at around 1.2270.

Supported by the broad-based dollar strength, USD/JPY holds above 131.00 and closes in on the multi-decade high it set at 131.25 in late April.

Gold registered losses for the third straight week and trades in negative territory near $1,870 early Monday. Although the risk-averse environment helps the precious metal limit its losses for the time being, another leg higher in US yields could force the pair to continue to push lower.

Bitcoin fell sharply over the weekend and extended its slide early Monday. BTC/USD was last seen trading at its lowest level since late January at $33,5000, where it was down 1.7% on a daily basis. Ethereum closed the previous four days in negative territory and failed to shake off the bearish pressure. At the time of press, ETH/USD was down 3% on the day at $2,430.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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