Asian Session Market Wrap
US stock futures fell, and Treasury yields rose after Moody’s downgraded the US government’s top credit rating. The downgrade, from AAA to AA1, was due to a growing budget deficit with no signs of improvement.
dropped 1.1%, and fell 1.3%. Meanwhile, longer-term Treasury yields hit the key 5% mark.
China’s rose by 6.1% in April 2025 compared to the same month last year, beating the expected 5.5% increase. However, this growth slowed down from March’s 7.7%, which had been the fastest growth since June 2021, when factories rushed to get ahead of upcoming US tariffs.
Factory output may have remained supported largely on the back of foreign companies rushing to beat the tariffs imposed by President Trump.
China’s property market is still struggling, with flat home prices and declining investment.
, which reflect consumer spending, grew by 5.1% in April, slowing from 5.9% in March and falling short of the 5.5% forecast.
Economists blame the slowdown on U.S. tariffs affecting consumer confidence and weak domestic demand.
Source: OANDA Labs
The commodity sector also showed weakness, with daily processing dropping 4.9% in April compared to March, and crude steel production falling 7% month-on-month.
On a positive note, the government’s trade-in program for consumer goods boosted home appliance sales by 38.8%.
The Chinese data follows on from weak retail sales last week and souring consumer sentiment. This is likely to weigh on the minds of consumers moving forward with a closer look at whether data continues deteriorating.
The European Open
Heading into the European open, European stocks fell on Monday, ending a five-week winning streak, as a surprise U.S. credit rating downgrade and disappointing economic data from China hurt investor confidence.
The dropped 0.5%, pulling back from the seven-week high it reached on Friday. The is also trading slightly lower this morning, down around 0.34% at the time of writing.
Luxury stocks fell after China’s April retail sales came in below expectations. Brands like Hermès, Burberry (LON:), and Moncler, which rely heavily on the Chinese market, each saw their shares drop around 2%.
Meanwhile, BNP Paribas shares rose 2.4% after the French bank announced a €1.08 billion ($1.21 billion) share buyback plan.
Volkswagen shares dropped 3.1% as the German automaker traded without the right to its latest dividend.
On the FX front, the fell by 0.6% to 144.80/yen on Monday, its lowest level since May 9, while the rose 0.3% to 1.1199.
The US dollar dropped 0.2% to 0.8358 Swiss francs, another safe-haven currency. The rose 0.1% to 1.3297, while the inched up 0.1% to 0.6413 after falling over 1% in the past three sessions.
Currency Power Balance
Source: OANDA Labs
Economic Data Releases
Looking at the economic calendar, there is the final number for Eurozone which is due in a short while. Beyond the data, we have ECB policymaker Mueller and a few Fed policymakers scheduled to speak.
Sentiment today will likely play a huge role in how markets perform and develop during the course of the day. For now, sentiment is one of caution and it will be interesting to see if this improves during the course of the day.
Technical Analysis – US Dollar Index (DXY)
From a technical standpoint, the (DXY) has looked poised for an explosive rally to the upside for some time.
However, the fundamental picture continues to evolve and keeps the greenback under pressure.
The downgrade by Moody’s this morning is a prime example, as markets were taken aback.
The result has seen a weaker USD at the European open, with the psychological 100.00 level now under threat.
Below the 100.00 level, support rests at 99.57 and could come into play if USD bears continue to push the index lower.
If the 100.00 handle holds, this could prove pivotal for bulls as it would be a sign that bullish momentum remains firmly in play.
The one concern for bulls, however, may come from the period-14 RSI, which has currently pushed below the 50 level, which is a sign of shifting momentum from bullish to bearish.
US Dollar Index Daily Chart, May 19, 2025
Source: TradingView.com
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