USD Recovers and Markets Await FOMC Minutes

USD

The U.S. dollar recovered slightly against most major pairs yesterday. Meanwhile, markets are awaiting minutes from May’s FOMC policy meeting, which will be released later today.

The minutes are widely expected to carry the view of major policy makers on interest rate hike at its June policy-setting meeting, as the U.S. economy grew at the weakest pace in three years in the first quarter of 2017. FOMC member Kashkari indicated that he's still on the fence, citing that jobs growth has been impressive but that inflation is heading the wrong way. Any confirmation that a June rate hike is on the table could stoke the dollar's gains.

Medium-tier US reports were mixed, with flash manufacturing PMI posting a surprise drop and the services PMI showing a stronger improvement. The Richmond manufacturing index and new home sales figures also disappointed.

• The U.S. dollar index (DXY), which measures the greenback against a basket of major currencies, settled at 97.30 pips.

EUR

The euro managed to hold on to most of its recent gains just above $1.12 as PMI reports came in mostly stronger than expected, except for the French flash manufacturing PMI. The German Ifo business climate index advanced from 113.0 to 114.6. German GfK consumer climate data is due today. The single currency could re-test $1.11 vs. USD, in anticipation of Mario Draghi's speech. Cautious remarks from the central bank head could prevent the shared currency from extending its rallies.

GBP

The sterling pound fell yesterday after Manchester attack and settled at $1.2950 vs. the greenback. Meanwhile, cable was further affected by Theresa May statement the terror threat had been raised to the highest possible level, from severe to critical, meaning an attack 
is “expected imminently”.

Technically, sterling trade could under pressure due to the upcoming elections. However, it could re-test $1.30 due to weak USD. There are no reports due from the UK today.

Gold

Gold pared its gains and settled at $1,250 per ounce, pulling back from a two-week high as the greenback finding support as the euro weakened. Gold had received support last week due to the U.S. political uncertainty and weak U.S. economic growth.

Oil

Oil prices settled high yesterday amid expectations that members of OPEC could agree to extend the production cuts deal until the first quarter of next year. Meanwhile, the U.S. crude ignored the US president's plan to sale of half the country's strategic oil reserves in his budget plan.

The most important economic events:

• EUR ECB President Draghi speaks in Madrid: (GMT 12:45) – Important
• USD FOMC Meeting Minutes (3 MAY): (GMT 18:00) – Important

Disclaimer
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.