News

Dollar Index Slips on Weaker Price Data

USD                                                                                 

The dollar index which measures the greenback against a basket of major currencies retreated from a twenty-three-month high of 98.33 to trade lower at 97.85 following the release of the GDP report on Friday. The report showed that the US economy grew by 3.2% in the first quarter of 2019 crushing weaker estimates of 2.0% only. However, the GDP Price Index which measures the annualized change in the price of all goods and services included in the GDP came in at 0.6%, the lowest in three years, massively missing the estimates of 1.3%. As a result, the probability of an interest rate cut by the Federal Reserve spiked, implying a Fed Funds Rate of 2.20% by year end versus 2.41% at the moment. Market participants await several economic indicators to be released this week, among them the Fed's preferred inflation gauge PCE Price Index, Manufacturing and Service PMI, and the jobs report. Moreover, the Federal Open Market Committee kicks-off a two-day monetary policy meeting tomorrow. The US 10-year yields plunged to a two-week low of 2.489%, the USDJPY dropped to 111.37, and the EURUSD climbed to $1.1165.

Metals

Metals prices surged as the greenback and Treasury yields tumbled following softer GDP price index. The data suggests that the Fed could be forced to lower the interest rate in the fourth quarter of 2019. The price of a gold ounce advanced to a two-week high of $1288, the silver ounce rallied to $15.06 but surrendered gains later, and palladium soared to a one-month high of $1466.

Oil

Oil prices crashed following Trump's tweet concerning oil supply. Early last week, the United States declared that there would be no new waivers for Iran's oil exports. As a result, prices rallied to a five-month high as investors were concerned over a shortage in supply. Iran responded by threatening to close the Strait of Hormuz to block the passage of oil tankers. Trump announced on Friday that he spoke with Saudi Arabia and other oil producers urging them the increase production to offset the shortage caused by sanctions. The West Texas Intermediate crude futures plunged to a three-week low of $62.26, and the Brent futures dived to $71.28.

Major Economic Events

GMT Country Event Expectation Previous
8:00 UK BoE Gov Carney Speaks     
12:30 US Core PCE Price Index (MoM) (Feb) 0.2% 0.1%
12:30 US Core PCE Price Index (YoY) (Feb) 1.7% 1.8%
12:30 US Personal Spending (MoM) (Feb) 0.2% 0.1%

 

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