A look at the day ahead in European and global markets from Kevin Buckland
King dollar is exerting its authority to end the week at new
heights. The yen, in particular, has been put in its place, sinking past the
closely watched 159 per dollar level last seen in late April, when Tokyo was
forced to spend a chunk of money on currency intervention to yank it back from
the brink.
The catalyst for the greenback's overnight surge wasn’t any
strong data that would have compelled the Federal Reserve to keep rates in
place for longer. In fact, the latest round of figures on housing and the
labour market were invariably soft, and economists forecast another weak
reading for the U.S. leading index later on Friday.
Instead, it’s that by contrast to major global central
banks, the Fed looks positively hawkish.
Even the Bank of Japan, an outlier in hiking rates when its
peers are cutting or standing by to cut, came across as dovish last week by
kicking a decision on quantitative tightening to its July meeting.
The Bank of England now looks poised to start cutting in
August, and the Swiss National Bank is setting the pace with two consecutive
reductions.
The Fed could still hardly be called a hawk among doves.
More like the dove with the sharpest claws.
The dollar’s surge against major currency rivals on Thursday
was enough to put it on course for a third straight winning week, but only
barely.
A host of data releases over the European day could easily
swing the pendulum. Britain, France, Germany and the euro area as a whole have
flash PMI readings, and the UK sees retail sales as well, which could have
benefitted from a warmer May.
Away from currency markets, there’s been little support from
the easy policy outlook. Equities in Asia at least are set to end the week with
a whimper, with a flat performance for Japan’s Nikkei looking like the best
market in the region.
Chip stocks have been sold off everywhere, arguing for more
of the same when Europe gets under way.
Considering the 1.5% or so gains so far this week across the
FTSE, DAX and STOXX 600, there's certainly room to fall.
Key developments that could influence markets on Friday:
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