Oils jumps to three-year high, Lagarde’s speech in focus

Following the results of Germany's federal election, shares in the country jumped to ten-day highs on Monday as fewer left-wing parties won power while a de-escalation of Sino-US tensions and Chinese authorities' decision to pump more cash into financial markets may have helped boost the stock market.

In early deals, the blue-chip DAX rose 1%, leading gains among regional indices, while the STOXX 600 index rose 0.6%.

Having narrowly won the national election, Germany's centre-left Social Democrats are now seeking to form a coalition with the Green Party and liberal Free Democrats in the "traffic light" coalition.

The dollar index reached a new high, while WTI rose a fifth consecutive day on Monday, heading to 77, amid concerns about supply as demand picks up in parts of the world with the easing of pandemic conditions.

USDJPY heads to 111.0

USDJPY and US bond yields are becoming more closely related. A re-test of 110.524 as a potential support zone within this progressively bullish trend might be worth watching. However, USDJPY looks stretched and Japanese investors also pulled money out of the yen due to higher US yields.

Following the Federal Reserve's announcement last week that it may start tapering stimulus as soon as November, US yields jumped to their highest levels since July in anticipation of tighter monetary policy. Also, interest rate hikes may follow earlier than expected.

Given the strong momentum, further USD strength is not ruled out, but overbought conditions indicate a break of 111.00 is unlikely to happen very soon. A break below 110.524 would show the current upward pressure is easing.

A more hawkish Fed and diminishing concerns about a potential Evergrande default are likely to keep the US dollar volatile.

WTI crude oil prices passed the critical 74.00 mark on Monday, extending the rally. The combination of rising open interest and positive price action enables the leg higher to continue and now targets three-month highs just around 76.33.

The recent rise in crude oil prices to the highest level since July provided the commodity-linked Loonie additional support and eased the USDCAD downward move slightly.

Events of today

European Central Bank (ECB) President Christine Lagarde will deliver a speech at 14:45 EEST.

Investors closely watch monthly US Core Durable Goods Orders data due to release at 15:30 EEST.

Bank of England (BOE) Governor Andrew Bailey also is to speak at 18:00.