Markets return from long weekend with hope, first NFP hint eyed

Investors are cautiously optimistic as UK and US traders return, pushing the dollar down and gold up. The US ISM Manufacturing PMI and Fede speakers stands out on a busy economic calendar. COVID-19 remains of worry in Asia but is in retreat in Europe and the US.

American traders return from the long Memorial Day weekend to a marginally weaker US dollar, despite an increase in Treasury yields. S&P 500 futures are on the rise.

The US ISM Manufacturing Purchasing Managers’ Index for May serves as the first hint toward Friday’s Nonfarm Payrolls release, yet the inflation component could have the most significant impact. Fears that the world’s largest economy could be overheating are weighing on markets.

Federal Reserve Governors Randal Quarles and Lael Brainard are scheduled to speak later in the day and may signal potential moves toward the bank’s decision later this month. Speculation of tapering is rising following upbeat economic data.

The greenback is retreating against the pound amid hopes that the UK vaccination campaign is ramped up. Immunization optimism trumps concerns about the Indian variant of coronavirus that could delay the June 21 reopening. Bank of England Governor Andrew Bailey is set to speak later. Speculation about a rate hike in 2021 is prevalent.

EUR/USD is hovering above 1.22, benefiting from dollar weakness and hope that Germany could remove covid restrictions shortly, responding to falling cases. Markit’s final Purchasing Managers’ Indexes for the services sector are set to be upbeat. Preliminary inflation statistics for May are forecast to print a moderate increase in the headline Consumer Price Index.

The Reserve Bank of Australia left its policy unchanged as expected and acknowledged the fast recovery. Nevertheless, the Canberra-based institution is holding back on tapering its bond buys, perhaps waiting for the Fed. AUD/USD is edging higher.

China hiked the demand from financial institutions to and now requires 15% minimum in foreign reserves against 5% in an attempt to push the yuan lower. The currency appreciated to the highest since 2018.

OPEC+ members are meeting on Tuesday and could decide to increase oil production in response to rising demand and higher prices. It is unclear if this additional output comes from Saudi Arabia or Iran, as the latter may be allowed to export crude if nuclear talks in Vienna end with a deal.

Cryptocurrencies have been consolidating their gains, with Bitcoin hovering near $37,000 and Ethereum changing hands around $2,600.

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