Dollar Rises; Euro Slips Ahead of Inflation Data/ ECB Meeting

USD

The dollar index which measures the greenback against a basket of major currencies raced higher to 90.23, erasing previous losses ahead of inflation figures. Investors are looking forward to the May Consumer Price Index, where there are expectations of another upsurge in numbers. If the numbers printed a higher reading, it will be hard for the Federal Reserve to keep ignoring the rise in inflation, while a soft reading would give the Fed space to continue with the current policy plan. The US 10-year yields fell to 1.47%, the lowest print since early March, but later recovered, and drove the dollar higher, where the USDJPY rallied to 109.67, and the AUDUSD declined to $0.7722.

Euro

The Euro drifted lower ahead of the European Central Bank monetary policy decision and US inflation figures. The US dollar surged a little, adding pressure on the Euro. However, traders are also anticipating the ECB outlook on the recovery, and whether the board will consider easing the Pandemic Emergency Purchase Program (PEPP) asset purchases soon. The EURUSD fell to $1.2156 after trading as high as $1.2218. A dovish tone from the ECB could drive the pair lower to $1.2085, while a hawkish scenario could boost it towards $1.2250.

CAD

The Canadian dollar weakened against other counterparts following the Bank of Canada monetary policy decision. The bank kept policy unchanged with interest rates at a historic low of 0.25% and asset purchases at 3 billion per week. The market was expecting the bank to go hard on inflation rise, but the bank held the same vision as peers, that inflation is transitory. The USDCAD rose to 1.2124, and the EURCAD rallied to 1.4760.

Equities

Futures tied to major US stock index futures had mixed performance ahead of the inflation figures. The falling yields supported tech stocks and weighed on the reflation trade stocks. The Dow Jones Industrial Average futures fell to 34387, the S&P500 slipped to 4210, while the tech-heavy Nasdaq continued to hover near 13800.

Metals

Precious metals prices were under pressure during the Asian session as investors await the inflation figures. An upside surprise could boost yields as the reading would raise the chances of the Federal Reserve to tackle inflation, while also a falling reading would ease inflation woes. The price of a gold ounce fell to $1877, the price of a silver ounce eased to $27.60, and palladium dropped to $2766.

Oil

Oil prices eased from their interim top despite a drop in inventories. The US Energy Information Administration reported a decline of 5.241 million barrels in US crude oil inventories, while a massive buildup of 7.046 million barrels in Gasoline inventories, raising concerns about the demand coming from the US driving season. On the other hand, market participants are looking forward to the fifth round of negotiations between the World's superpowers and Iran, where officials revealed that progress has been made. The West Texas Intermediate crude fell to $69.26, and Brent Blend August delivery dropped to $71.50.

Major Economic Events