Dollar dropped down more than half percent yesterday. Currency tested a day’s low 101.073, after the Federal Reserve hiked policy rate by 0.25%, in line with expectation.
The Federal Reserve raised interest rates by 0.25%, and signaled that a likely pause in June, though stressed that incoming data would reign supreme on monetary policy decisions.
The Federal Open Market Committee, the FOMC, raised its benchmark rate to a range of 5% to 5.25% from 4.75% to 5% previously.
The dollar index which measures the U.S. currency against six others, fell 0.62% to 101.3000.
In its May policy statement, The FOMC said it “will closely monitor incoming information and assess the implications for monetary policy,” moving away from its prior language in March that called for “some additional policy firming,” suggesting that a pause on hikes is in play for June.
Gold prices extended its gain for the second day and settled with a gain of 0.56% at 60965. Silver gained 0.44% and settled at 76582.00
Copper price plunged by 0.52% and settled at 735.50.
Crude oil took another plunge yesterday, prices fell more than 4% and settled at 5646 lowest levels since 27 March 2023. As investors fretted about the health of the U.S. economy ahead of an expected Federal Reserve interest rate hike later in the data.
Oil prices extended losses after government data showed U.S. gasoline inventories unexpectedly raised by 1.7 million barrels last week. Analysts polled by Reuters had expected a 1.2 million-barrel drop. [EIA/S]
U.S. crude inventories fell by 1.3 million barrels in the week, compared with forecasts for a 1.1 million-barrel drop.
Energy prices also came under pressure after data from China over the weekend showed April manufacturing activity fell unexpectedly in the world’s largest energy consumer and top buyer of crude oil.
Economic data and events to watch
China
At 7.15am- Caixin Manufacturing PMI due to release. Data is foreseen at 50.00, unchanged from previous.
Above data could have a neutral impact on Base metals and dollar.
Eurozone
At 11.30am – German Trade Balance will be set to release. Data is foreseen at 16.1B slightly positive from previous 16.0B.
At 12.30pm- Spanish Unemployment Change. Data is foreseen at -12.4k recovered from previous -48.8k.
At 12.45pm- Spanish Services PMI. Data is foreseen at 59.2 lower from previous 59.40.
At 1.15pm – Italian Services PMI will be released. Data foreseen at 56.6 higher from previous 55.7.
At 1.20pm – French Final Services PMI will be released. Data foreseen at 56.30, unchanged from previous 56.30.
At 1.25pm – German Final Services PMI will be released. Data foreseen at 55.7, unchanged from previous 55.7.
At 1.30pm – Final Services PMI will be released. Data foreseen at 56.60, unchanged from previous 56.60.
At 2.30pm – PPI m/m. Data is foreseen at -1.4% lower from previous -0.50%.
At 5.45pm- Market will react. ECB Main Refinancing Rate Decision and Monetary Policy Statement. Market forecast is to hike the rate by 3.75% from 3.50% previous policy rate.
At 6.15pm – ECB Press Conference, is expected to bring clutter for the market.
All above data expect to have a positive impact on Euro and bullions.
US
At 6.00pm – Unemployment Claims due to be released. Data is foreseen at239k slightly higher from 230k.
Prelim Nonfarm Productivity q/q due to be released. Data is foreseen at -1.7% lower from 1.7%. recover from previous -70.5B.
Prelim Unit Labor Costs q/q due to be released. Data is foreseen at 5.6% higher from 3.2%.
Trade Balance due to release. Data is foreseen at -63.7B, recovered from previous -70.5B.
All above data expect to have a positive impact on the dollar.