**European Markets Wrap: Dollar Takes a Breather as Markets Settle After Friday**
*Based in part on analysis by Justin Low, ForexLive/TradingView*
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### Introduction
The start to the European trading week has opened with more measured tones than witnessed on Friday, when volatility across markets led to pronounced moves in stocks, bonds, and currencies. Today’s session saw traders take a step back, reassess, and allow prices to stabilize, with the US dollar giving up some recent gains as risk appetite cautiously improved. This comprehensive overview will cover the main factors behind the dollar’s pause, the general mood in risk assets, and key currency and market developments in the European morning session.
### Friday Recap: Volatility Surge and Dollar Firmness
Friday’s trading session closed out the week with heightened activity as several themes converged:
– **Hotter than expected US payrolls:** Non-farm payrolls figures showed robust US job growth, which pushed up expectations the Federal Reserve might delay interest rate cuts further into the year.
– **US Dollar Surge:** In response to the strong data, the dollar index (DXY) climbed, and currencies like the euro and pound retreated.
– **Equities Drop:** US and European equities saw notable selling as rising yields weighed on risk assets.
– **Bond Markets Jittery:** US Treasury yields shot higher, reflecting changing rate expectations.
### Monday: Cooler Heads in Europe
After the dust settled from Friday’s fireworks, European trading on Monday saw a much calmer landscape:
– **Dollar Eases:** The greenback was mostly on the retreat as investors took profits and markets calmed.
– **Stock Markets Recover:** European indices found their footing, reversing at least a portion of Friday’s sell-off. Major bourses like the DAX, CAC 40, and FTSE 100 edged higher.
– **Bond Yields Retreat:** Global bonds stabilized, offering some relief to interest rate-sensitive sectors.
– **Cautious Optimism:** Early trading suggests market participants are tentatively positive, but wary of overextending risk positioning.
### The US Dollar: Pausing for Breath
The most notable currency move in European hours has been the shift in the dollar’s momentum:
– **Friday’s Advance:** The DXY reached around 105.90 after the payrolls report.
– **Monday’s Pullback:** The DXY slipped beneath 105.70, trimming earlier gains.
– **Key Pair Moves:**
– **EUR/USD:** Friday’s low below 1.0800 has been reversed, with the pair bouncing above 1.0825.
– **GBP/USD:** Cable found support near 1.2700, climbing back above 1.2730.
– **USD/JPY:** The pair, which approached 157.00 after payrolls, dipped back towards the 156.60 zone.
#### Themes Behind Dollar Softness
– **Profit Taking:** Traders closed out dollar longs established post-nonfarm payrolls.
– **Lack of Immediate Catalysts:** With no fresh US economic data in the European morning, the impetus for further dollar strength faded.
– **Risk Appetite:** Equity and credit markets recovering have pulled some flows out of traditional havens.
### Risk Sentiment: Recovery, But Fragile
Equity markets across Europe staged a modest recovery in early trade, with most major indices surfing near flat-to-slightly positive territory. Some of the main developments:
– **STOXX 600:** Up by 0.2 percent, led by healthcare and technology names.
– **DAX:** Gained roughly 0.3 percent, recovering from Friday’s decline.
– **FTSE 100:** Britain’s markets ticked higher, aided by a steadier pound and firmer commodity prices.
#### Supporting Factors for Risk
– **Receding Bond Yields:** A slight drop in yields gave support to tech and growth sectors.
– **No Major Weekend
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