Daily Market Update

Oil prices fall, Fed confident, Greenback rises

May 02, 2019

The U.S. Dollar is trading in mostly tight ranges, primarily gaining against “petro-currencies” including NOK, MXN, SEK, and CAD as oil prices declined by 1.7% to their lowest level in a month.

Overview

Copper and Gold also fell as commodities went through a bad run, which deflated Aussie and “Kiwi” (NZD) as well. Following the Fed meeting and press conference, the buck recovered some ground it had lost at the start of the week based on a more hawkish statement than expected.

It was notable that Fed chairman Jerome Powell sounded very positive on the stability of the economy and basically shut down major speculation about the central bank being ready to just lower interest rates. Clearly, he believes the recent slowdown in inflationary growth will be temporary and that the Fed’s targets across the board should be met this year.

With uncertainty still on trade and other global items, the greenback will stay afloat as long as there are no developments that increase prospects for prosperity in other regions. The data and Fed confidence are surely positive factors.  We shall see if indeed the momentum can continue with Factory Orders and Durable Goods Orders to be released at 10AM. Expansion is expected. Employment Situation awaits us tomorrow.

 

What to Watch Today…

  • No major events scheduled for today.
Complete Economic Calendar can be found here.

 

EUR

The Euro got rewarded naturally after its bloc showed it could beat expectations of expansion across a few gauges of the economy, but is once again under pressure because of the confidence in the U.S. economy displayed by monetary leaders.Nevertheless, the Euro-zone’s recovery is still under way with Markit Manufacturing Purchasing Manager Index figures showing overall less contraction than expected as Italy and Spain are now trying to make up for German lag.

Ultimately, Euro has room to grow, but the economic picture certainly needs to improve. We cannot compare growth on the other side of the Atlantic to what we got here, thus signs that PMIs and other indicators can get back to expanding will help in boosting the Euro, maybe with a longer lasting appreciation effect.

 

GBP

The Pound stayed in familiar territory following a Bank of England meeting in which Governor Mark Carney emphasized the importance of resolving the Brexit situation. However, as a nod to Sterling bulls, he indicated that the monetary committee would be willing to hike much more than markets are forecasting. Per his statement, after a transition period, “it will require more and more frequent interest rate increases than the market currently expects.”

The current prediction among investors that the BOE will only increment rates by 25 basis points between now and 2021 is a path that is “unequal” to the one needed to control inflation. We believe Pound could see a boost if there is some solution in sight and additionally the central bank decides to make interest rates an incentive to go long.

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