There are several fundamental events today, though most are of only moderate degree of importance.
One of the few major highlights today is the GfK consumer confidence index for June in Germany. It came in at -7, worse than the forecast of -5.2. Recall that Germany had to retain some of its coronavirus-countering lockdowns and other restrictions for a longer period of time than other EU countries, though investors had hopes that we would be seeing some sort of recovery by now.
In comparison, both business and consumer confidence were significantly better than the forecasts in Italy, though the readings are for May. The difference between German and Italian numbers shows how uneven the recovery is in the eurozone, and how dependent it is on the handling of the coronavirus pandemic, where Germany did arguably worse in the last wave because it wanted to avoid strict lockdowns.
The United States will deliver a durable goods orders report for April later, together with a revision of the GDP growth rate for the first quarter of 2021, both of which will be very important for the dollar and overall market sentiment.
In addition, there are initial and continuing jobless claims reports due today, which should indicate a mild recovery in the US labor market if they meet the forecasts.
In terms of the Forex market, today we are seeing a strengthening in the US dollar versus other major currencies, as measured by the dollar index. The USD was able to grow thanks to statements by the Vice Chairman of the Federal Reserve. Quarles said that based on the latest fundamentals coming out in the US, there might be a need for FOMC members to discuss an early tapering of asset purchases. If tomorrow’s inflation data overshoots the forecasts again, the case for early tapering will only get stronger, further boosting the dollar.
US Treasury bond yields are also increasing at the moment, following the dollar’s strengthening.
Due to the overall optimistic market sentiment, today European stock indices are on the rise, with the exception of the German DAX, which dropped due to some legal trouble for pharma giant Bayer.
US stock indices are also expected to trade higher today, though there may also be a bit of caution on account of tomorrow’s big inflation data dump in the United States.
