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Dollar Stands Tall and Gold Loses Luster

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The USD surged to its highest level in eight-weeks vs. the EUR on Tuesday, amid expectations that the U.S. Federal Reserve could raise interest rates soon. On the other hand, global stock indices rallied, led by shares of financial companies, banks and technology. The strong data on New U.S. Single-family Home Sales in April supported the view that the economy may be strong enough for the Fed to hike interest rates as early as June.

The U.S dollar index jumped by 30 pips, to 95.60 levels, as a result of strong U.S. data.

The EUR declined to $1.1150 on Tuesday, negatively affected by ECB Vice President Vitor Constancio’s comments, yesterday that “It is too early to discuss a further stimulus package by the ECB in response to worsening financial conditions.”

The pound rose vs. the dollar, as the support for staying in the EU increased. From a technical point of view, the cable could decline to $1.45.

The USD traded higher vs. JPY, backed by strong U.S data. The greenback could breach 110 levels to touch new levels during the course of the week. 

Gold fell by 4% and could decline further as Fed could hike interest rates soon. The yellow metal traded lower around $1,228, negatively affected by strong U.S dollar. From a technical point of view, the precious metal could decline further to $1,212 and $1,219, after which it could rise again to touch $1,250 and $1,240.

Oil prices jumped yesterday, thanks to the recovery of German economy and statements of Qatari energy minister Mohammad bin Saleh al-Sada. The Oil market is recovering slowly and a minimum price of $65 a barrel for oil is “badly needed at the moment”, Qatari energy minister said yesterday. WTI traded above $48.50 and could touch $49 and $50 during the coming period.

The most important economic events:

  • CAD Bank of Canada Rate Decision (MAY 25): (GMT 16:00) Important – Forecast (0.5%) – Previous (0.5%).
  • USD DOE U.S. Crude Oil Inventories (MAY 20): (GMT 16:30) Medium – Forecast (N/A) – Previous (1310k).
  • USD House Price Index (MoM) (MAR): (GMT 15:00) Medium – Forecast (0.5%) – Previous (0.4%).
  • USD Markit US Composite PMI (MAY P): (GMT 15:45) Medium – Forecast (N/A) – Previous (52.8).

Disclaimer
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.

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