LIVE MARKETS-Dollar rebound a key sign for equity strength

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DOLLAR REBOUND A KEY SIGN FOR EQUITY STRENGTH

The U.S. dollar bounced on Monday and its continued strength may be needed to ensure the stock market recovery remains intact, according to DataTrek Research.

“Perhaps the most unsettling thing about last month’s US equity market volatility was the simultaneous weakness in the dollar, which lost 4 and 2 percent in April alone versus a basket of developed and emerging market currencies, respectively. Now, the dollar has started to stabilize and was up modestly last week,” Nicholas Colas, co-founder at the firm said in a note.

“Dollar weakness in times of global economic uncertainty is quite rare, so seeing the greenback start to regain some lost ground is bullish for US financial assets,” he said.

The greenback jumped 1.20% against a basket of currencies =USD on Monday, following news that the United States and China reached a better-than-expected deal to temporarily slash tariffs.

The index fell to a three-year low last month as investors shed U.S. assets on concerns about the impact of tariffs.

Colas also said that he is watching the VIX .VIX for further clues on the stock market and was looking for the volatility index to fall below 20, which it did on Monday, while market expectations of the next Federal Reserve rate cut were also pushed to September.

“This week has the potential to be a “make or break” period for investor confidence related to US equities," Colas said.

"We will be looking for the VIX to break below 20, Fed Funds Futures to reflect a slightly more hawkish tone, and the dollar to keep strengthening as signs that domestic stocks are set up for meaningful further gains off the early April lows.”

(Karen Brettell)

MONDAY'S EARLIER LIVE MARKET POSTS:

TREASURY YIELDS JUMP, FED RATE CUT EXPECTATIONS PUSHED BACK CLICK HERE

ABU DHABI'S GOLDEN GOOSE - ADNOC'S DUAL ENERGY STRATEGY CLICK HERE

DID SOMEONE SAY "RECESSION"? CLICK HERE

RISK-ON IS OFF THE LEASH CLICK HERE

U.S. STOCK FUTURES ROCKET ON U.S.-CHINA DEAL TO REDUCE TARIFFS CLICK HERE

EUROPEAN TRAVEL RETAIL: RIPE FOR CONSOLIDATION CLICK HERE

DUSTING OFF UKRAINE CEASEFIRE BASKETS CLICK HERE

EUROPEAN BANKS: A RESILIENT EARNINGS SEASON CLICK HERE

STAY BULLISH! US EQUITIES LIKELY TO OUTPERFORM EUROPE CLICK HERE

US-CHINA DEAL LIFTS MINERS, AUTOS, LUXURY; DRAGS DEFENCE CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES RALLY, PHARMA DOWN CLICK HERE

THE DEVIL'S IN THE LACK OF DETAIL CLICK HERE