EURUSD
- Market Momentum: The EUR/USD experienced limited movement on Monday, staying around 1.0860, primarily due to the US markets being closed for the holiday weekend. The lack of fresh trading impetus kept the pair in a narrow range.
- ECB's Rate Reduction Flexibility: ECB Board member Villeroy highlighted the bank's significant flexibility for cutting rates. Villeroy supported the market's expectations for prolonged easing policies.
- Potential Rate Cuts in June: ECB member Rehn mentioned that as inflation nears the 2% target, it becomes feasible to ease monetary policy and consider rate cuts in June. This aligns with the broader expectations for upcoming rate adjustments.
- Rate Reduction Speed and Conditions: ECB’s Lane indicated that the rate at which the ECB will lower interest rates will depend on the persistence of underlying inflation and demand. Lane confirmed the bank's preparedness to start rate cuts as early as next week, depending on economic conditions.
- Impact of Quantitative Easing (QE): ECB policymaker Isabel Schnabel expressed concerns that QE might have weakened the effectiveness of monetary policy during the recent tightening phase. Schnabel's remarks underscore ongoing evaluations of policy tools and their impacts.
| SMA (20) | Rising |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: EUR/USD displayed minimal movement on Monday, trading around 1.0860 due to the US holiday. ECB Board member Villeroy indicated substantial leeway for rate cuts, aligning with market expectations for extended easing. Rehn suggested potential rate reductions in June as inflation targets near, while Lane emphasized that the pace of rate cuts will depend on persistent inflation and demand. Additionally, Schnabel noted potential weaknesses in QE's impact during recent monetary tightening. Overall, the ECB appears poised for potential rate cuts, with market conditions and inflation trends being crucial determinants.
GBPUSD
- GBP/USD Consolidation: GBP/USD is consolidating around 1.2770 after hitting two-month highs early on Tuesday.
- US Economic Data: This week's key US economic data might provide insights into the economic outlook and inflation trajectory.
- US GDP and Core PCE: The first reading of US GDP for Q1 will be released on Thursday, followed by the US Core Personal Consumption Expenditures Price Index (Core PCE), the Fed's preferred inflation measure.
- Impact of UK Election: Citigroup strategist Jamie Searle noted that the upcoming UK election in July reduces the likelihood of a near-term BoE rate cut and minimizes election-related interference with the BoE's cycle, emphasizing data dependency.
- Upcoming US Reports and Fed Speeches: Traders are awaiting the US Conference Board's Consumer Confidence report, FHFA's House Price Index, and speeches from Fed's Neel Kashkari, Mary Daly, and Lisa Cook later on Tuesday.
| SMA (20) | Rising |
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| RSI (14) | Rising |
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| MACD (12, 26, 9) | Rising |
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Closing statement: GBP/USD is consolidating around 1.2770 after reaching two-month highs early Tuesday. This week's key US economic data, including the first reading of Q1 GDP and the Core PCE Index, could offer crucial insights into the economic outlook and inflation trajectory. Citigroup strategist Jamie Searle highlighted that the upcoming UK election in July reduces the likelihood of a near-term BoE rate cut and lessens election-related interference, emphasizing the BoE's data dependency. Traders are also eyeing the US Conference Board's Consumer Confidence report, FHFA's House Price Index, and speeches from Fed officials Neel Kashkari, Mary Daly, and Lisa Cook later on Tuesday.
GOLD
- Gold Price Recovery: Gold price edges higher on Tuesday after rebounding from two-week lows of $2,325.
- Technical Analysis: Gold price is battling the 21-day Simple Moving Average (SMA) at $2,349, having closed above this level a day ago.
- Impact of China's Property Market: Renewed optimism surrounding China’s embattled property market, with Shanghai City announcing measures to support the housing market, has given gold buyers a breather.
- US Dollar Weakness: The extended weakness in the US Dollar is helping gold prices stay afloat, as traders await the return of US market participants after a long weekend for fresh trading impetus.
- Upcoming Fed Speeches: More speeches from Fed policymakers are due later on Tuesday, which will also remain in focus.
Closing statement: Gold price edges higher on Tuesday after rebounding from two-week lows of $2,325. From a technical perspective, gold is battling the 21-day Simple Moving Average (SMA) at $2,349, having closed above this level a day ago. Renewed optimism surrounding China’s embattled property market, with Shanghai City announcing measures to support the housing market, has provided some respite to gold buyers. Additionally, the extended weakness in the US Dollar is helping gold prices stay afloat as traders await the return of US market participants after a long weekend for fresh trading impetus. Investors will also be closely watching more speeches from Fed policymakers later in the day.
CRUDE OIL
- WTI Oil Price Appreciation: WTI Oil price appreciates ahead of the OPEC+ meeting.
- OPEC+ Meeting: The OPEC+ meeting on June 2 will discuss extending voluntary output cuts of 2.2 million barrels per day into the second half of 2024.
- Geopolitical Tensions: Escalated geopolitical tensions in the Middle East are providing support to oil prices.
- US PCE Price Index: Traders await the Federal Reserve's preferred measure of inflation, the Personal Consumption Expenditures (PCE) Price Index data, due on Friday, to gauge future US monetary policy.
- Iran’s Oil Output Plan: Iran plans to increase its oil output from 3.6 million barrels per day (bpd) to 4 million bpd, as reported by Reuters.
| SMA (20) | Falling |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: WTI Oil price appreciates ahead of the OPEC+ meeting, which will discuss extending output cuts. Support comes from heightened geopolitical tensions in the Middle East and anticipation of US PCE Price Index data. Iran’s plan to boost oil production adds another layer of complexity to the market outlook.
DAX
- German Ifo Business Climate Index: The index held steady at 89.3 in May, with the Ifo Expectations Index rising to 90.4 and the Ifo Current Conditions falling to 88.3.
- PMI Numbers and Business Optimism: The German private sector PMI numbers for May indicated an improving demand environment, driving business optimism to its highest level since February 2022.
- ECB Commentary: ECB Chief Economist Philip Lane signaled a June interest rate hike while advising caution post-June.
- Wholesale Price Index (WPI): Germany’s WPI showed a less steep year-over-year decline in April 2024, improving to -1.8% from -3.0% in March 2024.
- ECB Calendar and Inflation Focus: ECB Executive Board member Isabel Schnabel’s upcoming speech and the ECB Consumer Expectations Survey results will draw investor interest, impacting demand for DAX-listed stocks.
| SMA (20) | Rising |
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| RSI (14) | Slightly Rising |
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| MACD (12, 26, 9) | Slightly Falling |
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Closing statement: The DAX faced mixed signals from steady Ifo Business Climate Index figures and positive PMI data, suggesting improved business optimism. Meanwhile, ECB Chief Economist Philip Lane's comments about a June interest rate hike and cautious outlook post-June, along with a slight improvement in Germany's Wholesale Price Index, influenced market sentiment. Investors will also closely watch ECB commentary and upcoming surveys to gauge future market movements.