The dollar index, DXY, which measures the US dollar against a basket of six major currencies fell for the second consecutive day despite strong reading of Services PMI, ISM Non-Manufacturing, and JOLTS. The dollar reacted positively to the announcement of the reports. However, the gains were limited. On the other hand, the greenback traded at a two-week high against the Japanese Yen as investor’s risk appetite strengthened. From a technical analysis perspective, the dollar index is finding support at the 100-H4 simple moving average.
The Euro ended the day higher against the United States Dollar despite the dip earlier. The Eurozone Services PMI and Composite PMI were released yesterday, and they were almost unchanged from the prior month. However, the single currency was boosted by a Bloomberg report that stated that the European Central Bank could publicly announce at the June 14th meeting the tapering schedule of its quantitative easing program. Market participants will be focusing on the ECB meeting now as it is a live meeting. Moreover, the Euro got a little support from the press conference of the new Italian Prime Minister, which declared that there are no intentions to exit the Euro-area. From a technical analysis perspective, the Euro touched the 100-H4 simple moving average for the first time since April 20th.
The British Pound was among the top performers yesterday after an upbeat Services PMI. The Services PMI rose to a three-month high to a reading of 54.0 versus an expectation of 52.9. The United Kingdom had a better reading in the Manufacturing PMI, Services PMI and Construction PMI for May. If the economic reports continue to show a rebound in the UK economy, the chances of a rate hike by the Bank of England later this year will rise and provide positive sentiment to the cable.
The Australian dollar rose to a two-week high against the United States dollar after the solid first quarter GDP numbers. The GDP QoQ rose 1.0% versus an expectation of 0.9%, the best reading since 2011 and the YoY reading was the best in seven quarters. The main factors behind the growth were the rise in exports and government spending. The consumer spending added only 0.3 ppt to the GDP which is normal due to the household debt and lower wage growth.
The Canadian dollar faced choppy trading yesterday affected by the headlines related to NAFTA. The Loonie dropped to the lowest level in a two-and-a-half month against the United States dollar post announcements from Larry Kudlow that Trump is considering bilateral agreements instead of NAFTA. However, the CAD covered most of its losses after Treasury Secretary, Steven Mnuchin, said that he urged Trump to exempt Canada from Tariffs. In terms of data, the Trade Balance is due today along with the IVEY Manufacturing PMI.
Gold prices gained on Tuesday as the dollar weakened across the board. Gold is still trading in a tight range awaiting the development of new factors that can improve investor’s appetite towards the precious metal.
Oil prices suffered earlier on Tuesday as reports showed that the United States Government asked OPEC to increase its oil output by 1million barrel per day. However, oil prices recovered from its losses on reports that Venezuela will be halting more crude exports. Moreover, the American Petroleum Institute showed that the U.S. Crude oil inventories fell by two million barrels last week. The official US crude inventory data from the Energy Information Administration is due today.
Major Economic Events
|12:30||US||Nonfarm Productivity (QoQ) (Q1)||0.7%||0.7%|
|12:30||US||Trade Balance (Apr)||-50.00||-49.00|
|12:30||CA||Trade Balance (Apr)||-3.40||-4.14|
|14:00||CA||Ivey PMI (May)||69.7||71.5|
|14:00||US||Crude Oil Inventories||-1.824||-3.620|
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.