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Dollar Recovers Ahead of FOMC Minutes, Stocks Fall

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Equities

Wall Street tumbled on Tuesday after President Donald Trump shrugged-off the optimism over the progress made in the trade talks between China and the United States. US indices kicked-off the week with a positive gap after U.S. Treasury Secretary Mnuchin announced on the weekend that they agreed with Chinese officials to set trade war on hold. However, US indices fell from a two-month high to fill the positive gap as President Trump said that he was not pleased with the recent trade talks. Since early 2018, US stocks were vulnerable to announcements that raise trade war woes between the two biggest economies.

USD

The US dollar recovered its losses and advanced against a basket of major currencies ahead of FOMC meeting minutes. Investors are waiting the meeting minutes in order to grasp hints about the pace of the future interest rate hikes. The dollar index gained more than five percent since mid-April as the economic outlook from the United States strengthened and supported the Federal Reserve monetary policy tightening stance.

 GBP

The British Pound retested 2018 lows as investors wait for the inflation numbers. The Inflation Report Hearing took place yesterday where the Bank of England Governor, Mark Carney, said that the economy didn’t evolve in line with February’s forecast. The Governor noted that the slowdown in the first quarter occurred due to temporary factors and that the economy will start picking up again. He also confirmed that raising interest rates will be gradual and data dependent.

Gold

Gold prices are almost unchanged on the week near 2018 lows as investors are weighing different price movers. Gold fell nearly two percent last week due to the rise in US Treasury yields. FOMC meeting minutes is a key factor today as a bullish sentiment from the minutes might boost the yields again which could add pressure on the bullion.

Oil

Oil prices slipped from multi-year high on talks that the OPEC might decide to increase its output in its June meeting. However, oil prices remain supported by the rising geopolitical tensions. The American Petroleum Institute reported yesterday a decline in inventories by 1.3m barrels last week. The official data from the Energy Information Administration is due today.

Major Economic Events

GMT Country Event Expectation Previous
8:30 UK CPI (YoY) (Apr) 2.5% 2.5%
8:30 UK Core CPI (YoY) (Apr) 2.2% 2.3%
14:00 US New Home Sales (Apr) 680 694
14:30 US Crude Oil Inventories -1.567 -1.404
18:00 US FOMC Meeting Minutes    


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