The US Dollar relinquished a significant portion of its substantial gains from Monday on Tuesday, as market participants carefully assessed the implications of the recently announced US-China trade agreement, signs of moderating inflationary pressures, and increasing speculation regarding a potential interest rate cut by the Federal Reserve in the third quarter of this year.
Here is what you need to know on Wednesday, May 14:
The Dollar Index (DXY) lost its upward momentum and retreated towards the 101.00 level on Tuesday, primarily driven by improved sentiment across the risk-asset spectrum. Looking ahead, the Mortgage Bankers Association (MBA) Mortgage Applications data will be released, followed by the Energy Information Administration’s (EIA) weekly report on US crude oil inventories, which will provide insights into the current state of US oil supplies. Analysts will be closely watching these figures for indications of economic activity and potential impacts on energy markets.
EUR/USD rebounded from multi-week lows, recovering to the 1.1180 area amid renewed weakness in the US Dollar. The final German Inflation Rate for the period is scheduled for release on May 14, providing a definitive assessment of price pressures within the Eurozone’s largest economy. This data will be crucial for the European Central Bank (ECB) as it deliberates its monetary policy stance.
GBP/USD gained traction and rebounded noticeably just above the 1.3300 level, mirroring the broadly improved sentiment in riskier assets. The UK economic calendar features the release of the preliminary Q1 GDP Growth Rate, offering an initial assessment of the UK’s economic performance in the first quarter. Accompanying this release will be data on Business Investment, the Goods Trade Balance, Industrial and Manufacturing Production, Construction Output, and Labour Productivity, providing a comprehensive picture of the UK economy.
USD/JPY experienced renewed selling pressure after reaching seven-week highs around 148.60 the previous day, falling back to approximately 147.40 on Tuesday. The decline reflects a potential shift in market sentiment regarding the relative strength of the US and Japanese economies. The upcoming publication of Producer Prices in Japan will be closely monitored for indications of inflationary trends within the Japanese economy, which could influence the Bank of Japan’s (BOJ) monetary policy decisions.
AUD/USD managed to recover from Monday’s significant sell-off, surpassing the key 0.6400 level and its 200-day Simple Moving Average (SMA). This recovery suggests renewed confidence in the Australian Dollar. Several key Australian economic indicators are due for release, including Home Loans data, Investment Lending for Homes figures, and the Wage Price Index, which will provide insights into the housing market and wage growth trends in Australia. These data points are crucial for assessing the overall health of the Australian economy and its future prospects.
Prices of West Texas Intermediate (WTI) crude oil rose for the fourth consecutive day, approaching the $64.00 per barrel mark, as positive sentiment prevailed among traders following the US-China trade deal. However, increasing supplies of crude oil are limiting the commodity’s potential for further upside. The balance between positive sentiment and supply constraints will likely dictate the near-term price movements of WTI crude oil.
Gold prices traded within a narrow range around the $3,240 zone per troy ounce, influenced by the optimistic sentiment on the trade front and renewed selling pressure impacting the US Dollar. Meanwhile, the price of silver failed to sustain its initial upward momentum above the $33.20 level, declining to nearly $32.50 as the day progressed. The precious metals market remains sensitive to shifts in risk sentiment and currency movements.
