- Currency futures remain mildly supported on Monday amid improved risk sentiment.
- Easing trade war fears and improved global economic outlook pushes the euro, pound, and Aussie up.
- Policy divergence remains decisive, traders keep an eye on central banks for next breakout.
Currency futures opened the week with strong footing as traders weighed improved risk sentiment against shifting central bank dynamics. The US dollar showed signs of weakness against all peers as markets anticipate more dovish stance by the Federal Reserve. Political stability in Europe and optimism about US-China trade relations have lent support to the risk-sensitive assets like euro, pound, and Aussie.
However, the Japanese yen remains under pressure as markets reacted to the developments in Tokyo. The expected appointment of Sanae Takaichi as next prime minister of Japan has raised odds of further fiscal stimulus and a continued Bank of Japan’s loose monetary policy. This has weakened yen, increasing downside exposure to the JPY futures.
Contrarily, the British pound found renewed support as traders anticipate improving UK economy, revealed by the positive GDP figures. Sterling’s recent jump reveals a balanced market view, suggesting the GBP futures could stay firm if the Bank of England avoids imminent policy reversal.
Meanwhile, EUR futures show moderate resilience as political turmoil in France gets settled along with more coordinated economic tone across the Eurozone. Futures traders are adjusting ECB-Fed spreads narrower, limiting aggressive euro gains but providing a base for range-bound trading. The prices are consolidating rather than capitulation.
Across the pacific, the Australian dollar extended rebound amid trade optimism and China’s upbeat economic data. The PBOC holding rates unchanged also lent support to the AUD being a China’s proxy currency. Moreover, Australian Prime Minister’s visit to the US to enhance mutual trade and open new opportunities is benefiting the Aussie.
The US dollar positioning shows growing caution. The safe-haven demand keeps greenback supported but Fed’s dovish bias and weakening inflation could renew selling pressure. Policy divergence remain the key player; any surprise move from ECB, BoE, or BoJ could shift the market dynamics.
With improved risk appetite and converging policy paths, major currency futures are getting into a phase of readjustment rather than broad directional conviction. It leaves traders alert for catalysts that could spark next breakout phase.
