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US Dollar Steady near Four-Month Highs after FOMC

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US Equities

Major US indices ended the session in red on concerns that president Donald Trump will issue an executive order restricting certain Chinese companies from selling telecommunications equipment in the United States. The fears of China-US trade war has weighed on US stocks for the past weeks. The Trump administration officials will be meeting Chinese officials in Beijing today and tomorrow for trade talks.

USD

The US Dollar Index, DXY, rose almost four percent in the past two weeks on expectations that the Federal Reserve will continue in the tightening phase of the monetary policy. The Federal Open Market Committee kept interest rates unchanged in a range between 1.50%-1.75%. Majority of economists expected that there will be no change in rates in this meeting, and they are looking forward to June for the next interest rate hike. The Fed confirmed in the statement that the core inflation moved close to 2% target, risks remain roughly balanced, and the economy is growing at a “moderate” rate. The ADP employment change showed that 204 thousand jobs were added in April, ahead of the official Nonfarm Payrolls on Friday.

EUR

The Euro traded near a four-month low against the United States dollar yesterday as the preliminary release of the first quarter GDP showed a slight drawback. The common currency has been pressured lately by the soft economic data from the Eurozone. Traders will be focusing today on the inflation numbers, the Core Consumer Price Index will be monitored closely since any slowdown in these figures could add pressures to the euro.

GBP

The British Pound fell to the lowest since January 12 to trade at a low of $1.3554. Earlier in the day, the Construction PMI for April came out better than expected which boosted the currency. However, the Sterling came in under pressure and erased the gains on concerns about the Brexit talks. Investors will be focusing on the April Services PMI today, ahead of the Bank of England meeting next week.

Gold

Gold is trading in a major support area between $1300-10 as the Federal Reserve kept interest rates unchanged but confirmed the tightening stance. The demand for gold posted its weakest start to the year since 2008 according to the World Gold Council. The council said that Gold prices were pressured by the rise of interest rates which led investors to seek better returns. In addition, the consolidation of the prices in a tight range affected the investor’s sentiment.

Oil

Oil prices remained in a range-bound despite the rise in the U.S. Crude inventories. The Energy Information Administration (EIA) showed on Wednesday that the inventories rose by 6.2million barrels to a total of 435.96 million barrels last week. The production output of OPEC dropped to 32 million barrels per day from 32.5 million barrels per day in April, due to the falling output in Venezuela.

The most important economic events:

GMT Country Event Expectation Previous
8:30 UK Services PMI (Apr) 53.5 51.7
9:00 EU CPI (YoY) (Apr) 1.3% 1.3%
9:00 EU Core CPI (YoY) 0.9% 1.0%
9:00 EU EU Economic Forecasts    
9:00 EU PPI (MoM) (Mar) 0.1% 0.1%
9:00 EU PPI (YoY) (Mar) 2.1% 1.6%
12:30 US Initial Jobless Claims 225 209
12:30 US Nonfarm Productivity (QoQ) (Q1)  0.9% 2.7%
12:30 US Trade Balance (Mar) -50.0 57.60
12:30 CA Trade Balance (Mar) -2.30 -2.69
14:00 US ISM Non-Manufacturing PMI (Apr) 58.1 58.8

 

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