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Dollar Pulls Back from 2018 High Post FOMC Minutes

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Major US indices recovered early trading losses as FOMC minutes showed that the FED is not in a rush to tighten further even if inflation rose above 2% in the coming months. However, US indices remain under pressure as President Trump is said to consider tariffs up to 25% on imported vehicles mounting the fears of a trade war again. The FOMC minutes noted that the ongoing trade war threats are posing a wide range of risks.

USD

The dollar retreated from a fresh 2018 high after the FOMC meeting minutes revealed that the FED is not forced to tighten more aggressively. Most officials saw that a rate hike soon is appropriate as long as the economic outlook is strong which almost confirms a rate hike in the June 13th meeting.  However, some officials noted that the rates will be neutral “before too long” which might require a revision to the forward guidance. The dollar ended the day higher against a basket of major currencies except for the Japanese Yen which remains the top performer due to safe-haven demand.

 GBP

The British Pound drifted lower against the United States Dollar to find support near $1.33 level after a weaker-than-expected inflation data. The Cable started the year with great performance rising more than seven percent on expectations of a strong economic outlook from the United Kingdom. However, the pound gave up all its gains on softer economic data that decreased the chances of a rate hike by the Bank of England. Retail sales data for April will be due today, and Governor Carney will have opening remarks at the BOE'S Markets forum and deliver a speech at the society of Professional Economists annual dinner.

Gold

Gold prices rose to one-week high supported by the Fed’s Dovish interest rate stance. Gold prices dropped heavily in the past weeks on the expectations of higher Treasury yields due to aggressive interest rate hikes by the Federal Reserve and the fading fears of a trade war. However, the Treasury yields tumbled yesterday, post the FOMC minutes, president Trump showed threatened with new tariffs, and the Summit with Korea is about to fail. All the mentioned factors will provide support for gold prices as gold remains a safe investment during times of political and financial uncertainty.

Oil

Oil prices fell for the second consecutive day on expectations that the OPEC members will step up production to cover up the decrease in supply from Venezuela and Iran. Moreover, the buildup in US crude oil supply took the prices lower. The Energy Information Administration reported yesterday that the US crude oil inventories rose by 5.8 million barrels last week.

Major Economic Events

GMT Country Event Expectation Previous
8:30 UK Core Retail Sales (YoY) (Apr) 0.1% 1.1%
8:30 UK Retail Sales (YoY) (Apr) 0.1% 1.1%
11:30 EU ECB Publishes Account of Monetary Policy Meeting    
12:30 US Initial Jobless Claims 220 222
14:00 US Existing Home Sales (Apr) 5.56 5.60
17:00 UK BoE Gov Carney Speaks    

 
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