iFOREX Daily Analysis – 31/05/2016
iFOREX | May 31, 2016 07:33AM ET
The dollar reached a two-month high against a basket of currencies and a one-month high against the yen on Monday, after Federal Reserve Chair Janet Yellen fanned expectations the Fed would raise U.S. interest rates soon.
Political developments in Tokyo were also supporting the dollar against the yen. Japanese Prime Minister Shinzo Abe said he would delay a sales tax increase scheduled for next April by two and a half years, a senior ruling party official said on Monday. Japan is also expected to compile a supplementary budget to stimulate the sputtering economy, a move which is widely expected to be followed by further monetary easing by the Bank of Japan, all of which undercut the yen.
Volumes dwindled in Europe, with both London and U.S. markets closed for public holidays.
This week, U.S. non-farm payrolls and the Institute for Supply Management manufacturing survey are due. A solid employment report for May, due out on Friday, could heighten expectations for a June move and boost the dollar.
Today Germany is to produce data on retail sales and unemployment change; the euro zone is to publish preliminary data on consumer inflation; Canada is to publish its monthly report on gross domestic product; and the U.S. is to release private sector data on consumer confidence.
EUR/USD
The euro slipped to as low as $1.1097, its lowest since mid-March on Monday, though it has managed to bounce back from that level, which straddled its 200-day moving average. It last stood at $1.1150.
On the month, the common currency was down 2.7%, on course to post its first monthly loss in four months.
Today investors’ focus will be on Germany data on retail sales and unemployment change; euro zone preliminary data on consumer inflation and U.S. private sector data on consumer confidence.
Gold
Gold trimmed overnight losses in North American trade on Monday, after dropping below the key $1,200-level for the first time since February, as investors continued to factor in an increased chance of a near-term U.S. interest rate rise.
But the precious metal fell again in early Asia on Tuesday with sentiment downbeat on prospects for a rate hike by the Federal Reserve this summer seen growing.
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Gold traders will be looking out for a pair of reports on China's manufacturing sector this week, amid ongoing concerns over the health of the world's second biggest economy.
WTI Oil
Oil prices inched up toward $50 a barrel on Monday, although uncertainty ahead of an OPEC producer-group meeting later in the week was expected to cap gains. The Organization of the Petroleum Exporting Countries will meet in Vienna on Thursday, although most analysts did not expect any changes in the group's production. While OPEC has been unable to agree on an output freeze to support prices, Iraq was the latest Middle East producer to raise its export quota ahead of the meeting, supplying 5 million barrels of extra crude to its partners in June.
Trade was subdued because of public holidays in Britain and the United States, where Monday's Memorial Day is seen as the traditional start of U.S. summer driving season.
Europe 50
European stocks opened mostly higher on Monday, as investors shrugged off comments by Federal Reserve Chair Janet Yellen pointing to the possibility for a rate hike this summer.
During European morning trade, the EURO STOXX 50 added 0.21%, France’s CAC 40 slipped 0.10%, while Germany’s DAX 30 rose 0.31%.
Energy-related stocks were broadly lower, with shares in French oil and gas major Total SA (PA:TOTF) down 0.69% and Italy’s ENI (MI:ENI) fell 0.29%.
Financial stocks were steady to higher, as French lenders BNP Paribas (PA:BNPP) and Societe Generale (PA:SOGN) dipped 0.01% and 0.05%, while Germany’s Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG) gained 0.76% and 0.58%.
Among peripheral lenders, Italy’s Unicredit (MI:CRDI) and Intesa Sanpaolo (MI:ISP) climbed 0.54% and 0.68% respectively, while Spanish banks Banco Santander (MC:SAN) and BBVA (MC:BBVA) rose 0.27% and 0.12%.
In the U.S., equity markets remained closed for Memorial Day.
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