Soft Inflation Depresses Aussie


The Australian dollar tumbled against rivals following softer than expected first-quarter inflation figures. The Consumer Price Index YoY came in at 1.3% versus an expectation of 1.5% which raises the chances of an interest rate cut by the Reserve Bank of Australia. The latest RBA monetary policy meeting minutes showed that the Bank would likely cut interest rates if inflation softened and the unemployment rate edged higher. The AUDUSD fell to a six-week low of 0.7030, and the EURAUD raced higher towards a one-month high of 1.5959.


The dollar index which measures the greenback against a basket of major currencies climbed to 97.78, the highest since June 2017. The buck is finding support from the fact that the US economy is performing better than rivals which would allow the Federal Reserve to hold current interest rates for a period longer than other central banks. The New Home Sales rose 4.5% in March where market participants were expecting a drop by 3%. The US 10-year yields dropped slightly to 2.545%, the EURUSD plunged to a three-week low of $1.1192, and the GBPUSD declined to a two-month low of $1.2915.


The Canadian dollar weakened against the dollar despite the latest rally in oil prices. Market participants are focusing on the interest rate path of the Bank of Canada, dumping the historical correlation between the loonie and oil prices. The Bank will conclude its monetary policy meeting today, and the bank is widely expected to remain on hold. However, the statement could highlight the latest appreciation in oil prices and its effect on the Canadian economy. The USDCAD rallied to a six-week high of 1.3460, and EURCAD rose to 1.5093.


Major US indices raced higher with the S&P500 and Nasdaq closing at a record high. The stronger than expected corporate earnings enhanced investors risk appetite. Also, the growing optimism over the trade talks between China and the United States boosted the sentiment. The Dow Jones Industrial Average futures rose to a high of 26689, short one percent from logging a record high, the S&P500 futures climbed to 2939, and Nasdaq futures soared to 7843.


Metal prices continued to trade under pressure as the dollar raced to a twenty-three- month high. The price of a gold ounce dipped to a fresh 2019 low of $1266, the silver ounce logged its lowest daily close since late December at $14.82, and palladium settled marginally higher at $1393.


Oil prices held earlier gains and stood near the highest levels since late October. On Monday, the White House declared that the United States is not considering new waivers to Iran's oil exports and the Trump administration is aiming to drive exports to zero. On the other hand, the American Petroleum Institute reported that the weekly crude oil stock rose by 6.900 million barrels last week. Market participants await the official numbers by the US Energy Information Administration later today. The West Texas Intermediate crude oil futures tested a high of $66.57, and Brent futures rose to $74.71.

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