Fed Rate-Cut Prospects Cap Dollar Gains

USD

The dollar index, which measures the greenback against a basket of major currencies, has been hovering near a two-week high of 96.88 for the past couple of days. The latest developments in the trade matter between China and the United States have lowered the stretched chances of a 50-basis point rate cut in July supporting the dollar. On the other hand, the weak performance of European currencies such as the Euro and the Pound that account for almost 70% of the dollar index basket is leading investors to favor the buck. However, the remaining chances of an interest rate cut by the Federal Reserve are limiting the dollar gains. The US 10-year yields dropped to 1.941%, the lowest since November 2016, the EURUSD dropped to $1.1268, and the GBPUSD drifted lower to $1.2555.

Equities

Major US stock-index futures settled at a record high amid growing chances that the Fed will lower interest rates. The series of economic indicators that were released yesterday were soft, suggesting an interest rate cut by the Federal Reserve to support and maintain the longest economic expansion in US history. On the other hand, the optimism over trade talks between China and the United States is also raising investors' risk appetite. The Dow Jones Industrial Average futures closed at a record high of 26970, the S&P futures logged a record close for the third consecutive day at 2996.5, and Nasdaq futures posted a record of 7863. President Donald Trump cheered the strong performance of the US stock market, which he believes that it supports his second run for the presidency.

Metals

The price of a gold ounce faltered at a one-week high of $1437 and erased gains dropping to a low of $1414 weighed down by the enhanced risk sentiment. Investors were seen fleeing safety and jumping into riskier assets driving the US stock market to a record close. Meanwhile, the silver ounce held steady slightly above $15.20, and palladium hovered above $1560.

Oil

Oil prices recovered partial losses following the EIA weekly report. On Tuesday, prices fell heavily as the OPEC+ supply extension failed to impress market participants and support the latest rally. However, the US Energy Information Administration reported that the US weekly crude oil inventories dropped by 1.085 million barrels, to provide slight support to the falling prices. The West Texas Intermediate crude futures rose to $57.44, and the Brent futures rebounded to $63.97.

Major Economic Events

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.COM. 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.