News

US-Mexico Migration Deal Enhances Risk Sentiment

USD

The dollar index kicked-off the week on a stronger note trying to recover last week's losses following Migration deal news. The United States and Mexico succeeded late last week in striking a migration deal which avoided the implementation of 5% tariffs on Mexican products. DXY bounced off a two-and-a-half month low of 96.46 to trade higher at 96.85. Since early June, the rising chances of an interest rate cut weighed on the greenback. Market participants expect the Federal Reserve to cut interest rate couple of times during the second half of 2019 to support the economy amid growing signs of a slowdown. The jobs report showed that the US economy created only 75 thousand jobs in May missing estimates of 185 thousand, the unemployment rate held steady at 3.6%, while the average hourly earnings rose by only 0.2%. The US 10-year yields jumped from 2.054%, the lowest since September 2017, to 2.13% after the announcement of the migration deal. The USDJPY rose to 108.62, the EURUSD dropped to $1.1305, and the GBPUSD tumbled to $1.27.

Metals

Precious metals prices tumbled sharply as the dollar and Treasury yields surged. The price of a gold ounce dropped to a low of $1326 after trading at a fifteen-month high of $1348 on Friday following a softer-than-expected jobs report. The silver ounce plunged to $14.75, and palladium drifted lower to $1355.

Oil

Oil prices traded near a one week high during the Asian session supported by the optimism from the migration deal between Mexico and the United States which raised investor's hopes of a trade deal between China and the United States. On the other hand, the expectations of an extension of the OPEC+ supply cut is providing support the prices. The West Texas Intermediate crude futures rose to a high of $54.80, and Brent futures climbed to a high of $63.80.

Major Economic Events

GMT Country Event Expectation Previous

8:30

UK

Manufacturing Production (MoM) (Apr)

-0.7%

0.7%

8:30

UK

Industrial Production (MoM) (Apr)

-1.0%

0.9%

8:30

UK

Monthly GDP 3M/3M Change

 

0.5%

14:00

US

JOLTs Job Openings (Apr)

7.240

7.488


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