There has been a decisive shift in outlook across major markets in the last couple of days. The drivers have been a new phase of positive risk appetite, but also a significant breakdown on the dollar. Strongly encouraging newsflow on COVID-19 vaccination trials have allowed traders to pull forward expectations of when an effective vaccination could be usable. Furthermore, ever more fiscal support, coupled with a strengthening of EU foundations have arisen from the agreement on the EU Recovery Fund discussions. The net result has been a rout for the US dollar, with the US Dollar Index falling below support at 95.70. The vaccine progress is a positive for the global recovery, but the US economy is still struggling to contain infection rates and deaths from COVID-19. A negative impact on the US economic recovery in the coming months is being factored in. Elsewhere though, this dollar weakness is playing into breakouts on gold, silver, oil, equity markets and several major forex pairs (EUR/USD, AUD/USD, NZD/USD especially). There may be some near term kick back on these moves, but it looks to have been a decisive shift in outlook for the dollar and period of underperformance seems to be well set now.
Wall Street closed only marginally higher in the end, with the S&P 500 +0.2% at 3257, whilst US futures are flat today, with the E-mini S&Ps just +1 tick higher. Asian markets were mixed overnight, with the Nikkei -0.6% and Shanghai Composite +0.3%. European markets look set for marginal early slips with FTSE futures -0.2% and DAX futures -0.3%. In forex, there is a sense of consolidation, but the risk positive and USD weakness is still present with AUD and NZD outperforming. Only JPY and GBP are giving back marginally. In commodities, the upside breaks on gold (another +1%) but especially silver (a further +5%) continue, with oil just fading slightly at -0.5%.
It is once more rather quiet for the economic calendar today. The only significant data releases come later in the session, with the US Existing Home Sales at 1500BST. Sales are expected to recover significantly in June by 24.5% to 4.78m (from 3.91m in May). EIA Crude Oil Inventories are at 1530BST and are expected to once more be in drawdown by -2.0m barrels (after a surprisingly large drawdown of -7.5m barrels last week).