iFOREX Daily Analysis : May 18,2017
iFOREX | May 18, 2017 05:07AM ET
The dollar traded near six-month lows against most majors on Wednesday as the U.S. political crisis deepens, delaying any efforts by President Donald Trump to carry out his economic stimulus plans.
The Justice Department appointed a former FBI director as special counsel to investigate possible collusion between President Donald Trump's 2016 campaign team and Russia.
Trump is accused of attempting to influence the ongoing FBI investigation of Russia’s role in the election, something that the White House denied, and said that the president has “never” asked Comey to end any investigations.
These developments caused investors to move from risk assets and into safe-havens amid the continued political crisis in Washington.
The likelihood of more rate hikes later this year was downgraded this week due to U.S. political turmoil and softer-than-expected U.S. economic data in the past week, such as retail sales, consumer inflation and housing starts.
Today, the UK is to produce retail sales figures and the U.S. is to publish data on initial jobless claims and manufacturing activity in the Philadelphia region.
EUR/USD
The euro hit a six-month high of $1.1174 on Wednesday, following reports that U.S. President Donald Trump attempted to influence an ongoing FBI investigation of Russia’s role in the election, something that weighed significantly on market sentiment.
In addition, softer-than-expected U.S. economic data in the past week, such as retail sales, consumer inflation and housing starts failed to provide a boost to the dollar and lowered chances for more rate hikes later this year.
For today, the U.S. is to publish data on initial jobless claims and manufacturing activity in the Philadelphia region.
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Gold
The price of gold soared by almost 2%, reaching a two-week high on Wednesday, as investors poured back into the safe-haven trade, after U.S. political turmoil and a recent batch of downbeat economic data dampened investor appetite for riskier assets.
The U.S. political crisis continues to dominate market moves for a second-straight day, with accusations against Trump dampening expectations for economic policies favoring tax cuts and higher spending in the near future.
Today, gold traders will be shifting their attention towards U.S. jobless claims and the Philly Fed manufacturing survey.
WTI Oil
Crude settled higher on Wednesday, as investors welcomed the release of a positive report from the Energy Information Administration showing that U.S. crude inventories fell for a sixth-straight week.
For the week ended May 12, the EIA said that crude oil inventories fell by 1.75 million barrels, compared to expectations of a drop of around 2.4 million barrels.
Meanwhile, gasoline inventories dropped by only 0.413 million against expectations for a drop of 0.731 million barrels,
The smaller than expected drawdown in both crude and gasoline inventories caused oil prices to dip but losses were pared later during session, as investors turned attention to OPEC’s meeting on May 25.
US 500
The main U.S. stock indices posted their biggest one-day fall since Sept. 9 as investor hopes for tax cuts and other pro-business policies faded after reports that U.S. President Donald Trump tried to interfere with a federal investigation on Russia’s involvement in the U.S. elections.
The developments intensified doubts that Trump would be able to follow through on his promises for tax cuts, deregulation and fiscal stimulus. Those were the pledges that had helped fuel the post-election rally on Wall Street.
The Dow Jones fell 1.78 percent, the S&P 500 lost 1.82 percent and the Nasdaq dropped 2.57 percent. Nasdaq had its steepest one-day loss since June 24, after Britain voted to exit the European Union, as did S&P's financial and technology sectors.
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