The dollar weakens near four weeks low after data showing weaker-than-expected U.S. producer and consumer prices cemented the view that the Federal Reserve will not raise interest rates later in the day.
The Federal Reserve held interest rates unchanged but indicated that borrowing costs will rise by another 50 basis points by the end of December, which caused the currency to respond favourably and off from the day’s lows.
- The Federal Open Market Committee, the FOMC, kept its benchmark rate in a range of 5% to 5.25%.
- It was the first time in more than a year that the Fed decided to keep rates steady, but the central bank signalled it wasn’t done with hikes, projecting at least another interest rate increase.
- U.S. After increasing by an unrevised 0.2% in April, the producer price index for final demand decreased by 0.3% last month.
- Goods prices, which rose 0.2% in April, were last month depressed by a 6.8% tumble in energy prices.
Precious metals had a neutral to positive trade yesterday. Gold prices rose by 0.14% and settled at 59298. Silver recovered nearly 0.77% and settled at 72651.00.
While Comex Gold and Silver Gold prices drop more than 1% as Federal Reserve kept rates steady but warned that it will likely hike at least two more times this year.
Today, Gold futures have immediate support at 59150-58850-58750.00. On the upside, immediate resistance is seen at 59450-59980.00
Silver Future has support at 72050-71500 and resistance at 72780x-73350.00
Base metals enjoyed a bullish rally for a second consecutive day after China lowered short-term lending rates to support economic recovery. Copper futures settled at 731.85, up 0.47%. Zinc prices are up by 2.82% at 220.95. Aluminum and Lead traded up by 0.39%, and 0.27% respectively.
- In accordance with forecasts, China’s central bank reduced the borrowing rate of its medium-term policy loans on Thursday as Beijing increases stimulus measures to support a wobbly economic recovery. This is the first time in ten months that this has happened.
- The move comes just days after it lowered two key short-term policy rates on Wednesday.
- The People’s Bank of China (PBOC) announced that it had reduced the interest rate on some financial institutions’ medium-term lending facility (MLF) loans worth 237 billion yuan ($33.09 billion) by 10 basis points (bps), from 2.75% to 2.65%.
- Compared to the previous year, industrial production increased by 3.5% in May, according to figures from the National Bureau of Statistics. The reading was substantially lower than the 5.6% gain witnessed in April as well as the 3.8% increase that had been anticipated.
- Industrial output growth for the year as a whole has stayed constant at 3.6%, which is slightly higher than the 3.3% recorded in the first five months of 2022.
Technical Levels – Copper prices now have immediate resistance at 733.50 above it 738.50-745.25. On the downside, support is seen at 728.50-722.50.
Crude oil prices lost their previous day’s gain, falling more than 1% as markets evaluated an unexpectedly big build in U.S. crude oil against optimistic projections for strong demand growth and belief that the Federal Reserve will probably hold off on raising interest rates.
The Energy Information Administration reports that for the week ending June 9, U.S. crude oil stockpiles increased by nearly 8 million barrels. Analysts had estimated a 500,000-barrel decline.
Brent Crude traded down by 1.25% at $73.15 a barrel. U.S. West Texas Intermediate (WTI) crude was down 1.40% at $68.28. MCX Crude is down by 1.13% at 5664.
Technical Levels – Crude oil having immediate resistance 5845-5935. On the downside, crucial support is seen at 5620-5530.00.
Economic data and events to watch
Japan
At 10.30amm – Tertiary Industry Activity m/m. Data is foreseen at 0.5% against a contraction of 1.7%.
Above data could have a positive impact on Yen.
U.K.
At 9.05pm – MPC Member Cunliffe Speaks
All of the above speech expect to have a volatile impact on the pound.
Technical Levels –GBPINR has resistance at 103.88-104.25. Support is at 103.55-103.25
Eurozone
At 12.15 pm- the French Final CPI m/m is to be released. Data is expected to come at -0.1%, from the previous -0.1%.
At 12.30 pm – German Buba President Nagel Speaks.
At 2.30 pm- Trade Balance. Data is foreseen at 16.8B slightly lower from 17.0B.
At 5.45 pm – Monetary Policy Statement and Main Refinancing Rate. Expect to hike by 4.0% from the 3.75% previous policy.
At 6.15 pm – ECB Press Conference.
Both the above data could have a positive impact on the Euro.
Technical Levels – EURINR has immediate resistance at 89.10-89.55 and support at 88.60-88.50.
Canada
At 5.45 pm – Housing Starts. Data is foreseen at 239k lower than the previous 262k.
At 6.00 pm – Manufacturing Sales m/m. Data is foreseen contraction of 0.2% against the previous 0.7%.
Both data could have a negative impact on USDCAD.
U.S.
At 6.00 pm – Core Retail Sales m/m is to be released with a forecast to come at 0.1% from the previous 0.4%.
Empire State Manufacturing Index expects to reduce by 15.00% from the previous -31.8.
Retail Sales m/m. Expect to contract by 0.2% against 0.4%.
Unemployment Claims. Data is foreseen at 246k lower than 261k.
Philly Fed Manufacturing Index. Data is foreseen contraction by 13.9 against the previous contraction of 10.4.
Import Prices m/m. Expect to contract by 0.5% against the expansion of 0.4%.
At 6.45 pm – Industrial Production m/m. Data is foreseen at 0.1% lower from the previous 0.5%.
At 7.30 pm – Business Inventories m/m. Data is foreseen at 0.2% higher from -0.1%.
At 8.00 pm – Natural Gas Storage. Forecast 97B is lower than the previous 104B.
All the above numbers will have a volatile impact on the dollar.
Technical Levels – The dollar index having crucial support at 102.65 below it will expect to extend losses and it could test 102.45-102.20. On the upside, resistance is seen at 103.10-103.55. Yesterday, it remained above 103.047 levels.