The European currency starts the new week with moderate growth against the US dollar, again testing 1.0600 for a breakout and settling near the local highs updated last Thursday. Moderate support for the single currency at the beginning of the week is provided by the weakness of the US dollar, which came under pressure amid a noticeable correction in the yield of US Treasury bonds. Last Thursday, analysts recorded a decline in the yield of 10-year bonds to a three-week low of 2.77%, while earlier during the month the bonds showed a yield of 3.2%. In turn, pressure on the euro is exerted by the soft monetary policy of the European Central Bank (ECB), or rather the growing gap between the rates of the European regulator and the American one. Representatives of the ECB are beginning to speak out in favor of the idea of launching a rate hike program, but the official position of the Bank is still quite cautious. However, it is unlikely that the ECB will be able to remain on the sidelines for a long time, and the point here is not in the competition of rates or exchange rates. Inflation in the eurozone is growing at a record pace, and here the European regulator is at risk of following the path of the US Federal Reserve, which for a long time considered record price growth to be only a temporary phenomenon.
The pound shows the uptrend in trading in tandem with the US currency during the morning session, testing the level of 1.255 for a breakout and updating local highs from May 5. The strengthening of the British currency at the beginning of the week is facilitated by the growth of corrective sentiment for the US dollar against the backdrop of a noticeable decrease in the yield of US Treasury bonds. Also, traders are still taking a lead from relatively optimistic macroeconomic statistics from the UK on Friday, which turned out to be significantly better than negative forecasts. In April, Retail Sales added 1.4% after falling by 1.2% a month earlier, although analysts had expected a decline of 0.2%. In annual terms, the indicator showed a sharp drop of 4.9% after increasing by 1.3% in March, while preliminary market estimates suggested a more active decline of 7.2%. Retail Sales excluding Fuel increased by 1.4% MoM, but decreased by 6.1% YoY, while the forecast was for a contraction of 0.2% MoM and 8.4% YoY. Today, statistics on housing prices in the UK were released. Rightmove House Price Index increased by 2.1% in monthly terms and by 10.2% in annual terms, which turned out to be slightly higher than the previous values at the levels of 1.6% MoM and 9.9% YoY.
The New Zealand dollar is showing solid growth against the US dollar during the Asian session, building on the strong "bullish" momentum that was formed last week. NZDUSD is testing 0.6450 for a breakout, updating local highs from May 5. The instrument shows an uptrend against the backdrop of a correction in the US currency, which, in turn, reacts sharply to a decrease in the yield of US Treasury bonds. Also, the positions of the New Zealand dollar are strengthening on the news from Shanghai, where the authorities plan to lift the previously imposed quarantine restrictions from June 1. At the same time, the macroeconomic background from New Zealand remains rather neutral. Data released on Friday showed a slowdown in Credit Card Spending in April from 3.4% to 1.1%, which was worse than analysts' average forecasts of growth of 1.6%. Exports from New Zealand in April slightly decreased from 6.48 billion to 6.31 billion dollars, but against the backdrop of a sharper drop in imports from 7.06 billion to 5.73 billion dollars over the same period, the country's Trade Balance increased in April by 584 million after a decline of 581 million dollars a month earlier. Traders are waiting for the results of the meeting of the Reserve Bank of New Zealand (RBNZ), which will be announced on May 25, counting on another increase in interest rates by 50 basis points.
The US dollar is traded against the Japanese yen with a downtrend during the Asian session, once again testing the level of 127.50 for a breakdown. USD/JPY is located near the local lows of April 27, maintaining momentum for further development of the downtrend in the short term. The development of "bearish" trend is facilitated by corrective sentiment in the US currency, associated with a drop in the yield of US Treasury bonds. Investors also fear a further deterioration in inflation in the country, despite the fact that the latest data on consumer prices in the US reflected the possible passage of the peak of growth. One way or another, the policy of the US Federal Reserve has not changed much so far, and at its next meeting the regulator plans to raise the interest rate by another 50 basis points. In turn, the Bank of Japan maintains a wait-and-see attitude, preferring to limit itself to managing the quantitative easing program. Friday's statistics on inflation for April in Japan reflected the growth of the National Consumer Price Index by 2.5% after increasing by 1.2% a month earlier. Market forecasts assumed an increase of only 1.5%.
Gold prices continue to show moderate growth at the beginning of the new week, updating local highs from May 12. The instrument is testing 1850 for a breakout, showing no clear signs of a weakening trend. The main factor in the growth of gold at the moment remains the weak dollar, which came under pressure after the publication of not the most optimistic macroeconomic statistics last week. In addition, investors are reacting negatively to the sharp decline in US Treasury yields. This week, market participants are waiting for the publication of the minutes of the last meeting of the US Federal Reserve, hoping to receive clear evidence of the continuation of the "hawkish" monetary policy. Also on Thursday, updated data on the dynamics of US GDP for Q1 2022 will be published. The previous estimate reflected the fall of the US economy by 1.4% in annual terms.