Sceptical About Dollar Rally
Hawkish FOMC Minutes Could Push Gold Lower
UK Earning Data Could Save Sterling
API Data Tumbled While Focus on Crude Inventory
European markets are keeping their attention on the upcoming FOMC minutes. The saggy inflation data could have an influence on the Fed minutes. The Fed see a valid reason to keep the interest rates at their current if the inflation does not create much rifts in the market. What the market would be looking at is the wind-up timing in relation to the Fed’s balance sheet. The market is expecting the Fed to announce the winding down of the size of their balance sheet to begin in September
Sceptical About Dollar Rally
The king dollar is trading lower despite the fact that US retail sales data confirmed that the consumers are supporting the economy. The growth in the US wages is making consumers spend more. The US Empire State index also showed some solid reading and printed the highest level since September 2014. The index plays a fair share in the GDP growth and this confirms that we could be looking at a much better GDP growth for 2017.
The dollar rally picked up more fuel on the back of the hawkish comments by a top Federal Reserve official. Traders pay close attention to Bill Dudley, the New York Fed Chief, because of his influential position in the committee. He clearly wants the market to acknowledge that it would be a mistake to consider that the Fed cannot trigger the button for another interest rate hike this year.
However, we are sceptical about the current momentum in the dollar. The CFTC data is still showing that speculators are still piling into the second most crowded trade.
The retail sales number does provide a reasonable picture of the consumer health, however, the Fed considers inflation dearer. We do know that the inflation data was saggy and the fed could acknowledge this in their minutes. Therefore, we do think that the prospects of another rate hike are still remote for this year.
Hawkish FOMC Minutes Could Push Gold Lower
The bullish dollar is shifting the focus away from the safe havens. The yellow metal, the Japanese yen and the Swiss Franc, all are out of fuel. The Increasing odds of the US interest rate hike could push the gold price below the 1250 and this could happen if the upcoming FOMC minutes deliver some hawkish tone.
UK Earning Data Could Save Sterling
Sterling took the beating and the punishment could continue if the economic numbers do not provide support. The UK average earnings in the three months may rise to 2 percent. Even if this number is printed, there would not be a moment of celebration because inflation would still easily be outpacing it and creating more pressure for consumers. The inflation data was the only element which was supporting the argument that the Bank of England should tighten the monetary policy. However, the latest inflation number has eased off those concerns for the BOE. The unemployment rate is expected to remain at 4.5 percent, the lowest number since 1975 despite Brexit.
The Sterling drop against the euro is more prominent and a lot of this is just purely insane. This is because investors are hanging their hopes that the euro-Sterling rally could push the pair to parity. The UK is heading to leave the EU bloc and investors do not believe that the U.K. has any firm plan to save the economy from a catastrophe.
API Data Tumbled While Focus on Crude Inventory
Crude oil moved higher as the API inventory data tumbled. However, the data which matters the most is your crude inventory number and this is what investors will be looking at more closely. The forecast is that the downtrend would confirm a drop of 3.4 million barrels. Remember the oil curve is already in backwardation. It implies that the contracts approaching their expiration are trading at a higher price in comparison to the forward contract. In simple words, it shows that the supply concerns are fading fast and the market could be looking at a situation when demand would exceed supply.
