Optimism fades at the start of the week

Markets have turned risk-averse at the start of the week following the risk rally witnessed on Friday. The disappointing macroeconomic data releases from China, coronavirus-related concerns and heightened fears over a global economic slowdown allow safe-haven flows to continue to dominate the markets. The European Commission will release the Economic Growth Forecasts for the euro area and the Bank of England’s Monetary Policy Hearing will take place in the UK parliament. In the second half of the day, the Federal Reserve Bank of New York’s Empire State Manufacturing Survey will be looked upon for fresh catalysts.

The data from China showed earlier in the day that Retail Sales contracted by 11.1% on a yearly basis in April, missing the market expectation for a decline of 6% by a wide margin. Additionally, Industrial Production narrowed by 2.9% in the same period, compared to analysts’ forecast for a growth of 0.7%. Meanwhile, the city of Shanghai announced that coronavirus controls will remain in place due to the high risk of a rebound in infections despite the fact that five out of the city’s 16 districts have reported no cases. Moreover, the city of Beijing decided to extend the work-from-home orders in four districts, including Chaoyang.

The US Dollar Index, which snapped a six-day winning streak and lost 0.3% on Friday, is staying relatively quiet near 104.50 early Monday. The benchmark 10-year US Treasury bond yield is moving sideways near 2.9% and US stock index futures are down between 0.5% and 0.7%.

EUR/USD lost more than 100 pips last week and stays relatively quiet near 1.0400 early Monday. Eurostat will release the Trade Balance data for March later in the session.

GBP/USD rose toward 1.2300 during the Asian trading hours on Monday but failed to preserve its recovery momentum.

USD/JPY trades in negative territory near 129.00 in the European morning. Bank of Japan Governor Haruhiko Kuroda said earlier in the day that it was important for them to continue to support the economy with powerful monetary easing. Despite these comments, the risk-averse market environment helps the Japanese yen find demand.

Gold fluctuates in a tight channel above the key $1,800 mark early Monday. The yellow metal continues to have a difficult time capitalizing on safe-haven flows.

Following the decisive rebound witnessed over the weekend, Bitcoin came under renewed selling pressure at the start of the week and was last seen trading near $29,500, where it was down nearly 6% on the day. Ethereum turned south and started testing $2,000 after gaining nearly 6% in the previous two days.

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