News

Dollar Inches Higher On Powell; Stock Futures Extend Declines

USD

The dollar index, which measures the greenback against a basket of major currencies, inched higher to 100.37 on Fed's chairman comments. Last week, the Fed futures were pricing in a probability of having negative interest rates, but during his webcast yesterday, Jerome Powell said that the central bank is not considering negative interest rates. He stated that the outlook is highly uncertain, and the downside risks are significant, but the Federal Reserve will continue to use its tools to their fullest until the crisis has passed and recovery is well underway. On the other hand, the Producer Price Index plunged 1.3% in April, showing the serious impact of the COVID19 on the US economy. The US Treasury yields declined for sharply where the US 10-year yields fell to 0.615%, and the US 30-year yields dropped to 1.30%. The EURUSD plunged to $1.0795, the GBPUSD tumbled to $1.2180, and the AUDUSD descended to $0.6419. Market participants are looking forward to the US initial jobless claims later today, as 33.5 million applied for unemployment benefits in the past weeks.

Equities

Major US stock-index futures declined further as Powell warned of the current situation. He stated that the outlook is highly uncertain, the downside risks to the economy are significant, and more measures should be taken to support the economy. On the other hand, investors are afraid of a second virus outbreak as states reopen quickly. The Dow Jones Industrial Average futures declined to a three-week low of 22980, the S&P500 futures fell to 2795, and Nasdaq futures plunged to 8878.

Gold

Gold prices edged higher on demand for safety, but Powell's comments capped gains. The fears of a second outbreak are driving investors towards safety. On the other hand, the Fed's chairman announced that the Federal Reserve is not considering negative interest rates, which if adopted, would boost the demand for the precious metal. The price of a gold ounce rose to $1719.90, the price of a silver ounce inched higher to $15.63, while palladium futures declined to $1747.

Oil

Oil prices moved slightly higher as countries reopen businesses, and oil producers expressed willingness to do more to support the market. However, the fears of a second breakout limited the rally. The International Energy Agency warned of the impact of a second outbreak on the demand levels. On the other hand, the US Energy Information Administration reported a drop in inventories by 0.745 million barrels, marking the first declined since January. The West Texas Intermediate crude June delivery rose to $26.28, and Brent Blend July delivery rallied to $30.25.

Major Economic Events

GMT Country Event Expectation Previous

11:30

UK

BOE Gov Bailey Speaks

-

-

12:30

US

 Initial Jobless Claims

2.500

3.169

12:30

CA

 Manufacturing Sales (MoM) (Mar)

-5.7%

0.5%

15:15

CA

 BoC Gov Poloz Speaks 

-

-

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