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Rate Cut Chances Weigh on Dollar

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USD

The dollar index which measures the greenback against a basket of major currencies finished sharply lower on Friday at 97.61 amid growing chances of an interest rate cut by the Federal Reserve. Investors' are expecting that the trade tensions between China and the United States will weigh on the economic outlook and force the Fed to cut rates. The latest economic data showed that inflation slowed down in the previous months. The CME Fed watch tool is showing a probability of 49.8% that the Fed will cut interest rates by 25 basis points in its July 31st meeting. The US 10-year yields dropped to a low of 2.121%, the lowest since September 2017, the USDJPY tumbled to 108.07, the lowest since January, while the EURUSD surged to a high of $1.1190.

Metals

Gold prices soared as the dollar plunged along with US Treasury yields. The never-ending trade war between China and the United States is weighing on the economic expectations, increasing the chances of an interest rate cut by the Federal Reserve. The price of a gold ounce climbed to $1312, the highest since late March. On the other hand, the silver ounce rose to a two-week high of $14.66, while palladium tumbled to $1321.

Oil

Oil prices continued lower amid worsening economic outlook. The latest economic data showed a significant drop in the manufacturing activity in Asia, Europe, and the United States, which would drive down the demand for oil. The West Texas Intermediate crude futures dropped to $52.11, the lowest since mid-February, and the Brent futures tumbled to $60.74.

Major Economic Events

GMT Country Event Expectation Previous

7:55

EU

German Manufacturing PMI (May)

44.3

44.3

8:00

EU

Manufacturing PMI (May)

47.7

47.7

8:30

UK

Manufacturing PMI (May)

52.0

53.1

14:00

US

ISM Manufacturing PMI (May)

53.0

52.8

 

Disclaimer

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