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US Open Preview – Data misses push euro, pound lower; FOMC meeting minutes ahead
May 23, 2018 12:26 pmVideo
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Here are the latest developments in global markets:
Day ahead: FOMC meeting minutes to clear up inflation approach; Eurozone flash consumer confidence in focus
The FOMC meeting minutes will be the main highlight of the day as investors are eagerly waiting for policymakers to explain the word “symmetric” used in the latest rate statement to describe the inflation target. The addition of this word was taken as a signal that the Fed will probably leave inflation to overshoot the 2.0% goal without changing its rate trajectory. If this is the case, then the dollar could lose ground on speculation that the Fed will not raise interest rates faster this year if inflation climbs above 2.0%. Any comments on economic growth could attract attention as well, given the removal of the sentence “the economic outlook has strengthened in recent months”, which hinted that economic expansion may have lost steam.
Earlier at 1345 GMT, US flash Markit PMI readings for the month of May could move the dollar before the release of the FOMC meeting minutes. Expectations are for the manufacturing PMI to remain unchanged at 56.5, at the highest level in over three years, while the Services PMI is seen slightly higher at 54.9 compared to 54.6 in April. Should the numbers prove better than expected, which would suggest that US GDP growth could rebound in the second quarter as analysts are projecting, the greenback could gain some ground. A few minutes later, at 1400 GMT, April’s home sales out the US will also come under review.
Meanwhile, developments on the trade front and the North Korea story will remain under the spotlight. Yesterday the US President, Donald Trump, surprised markets by saying that he was not “really” satisfied with US-China trade talks, a few days after the US Treasury Secretary announced that both countries had agreed to suspend proposed import tariffs. Moreover, he notified that North Korea must meet conditions for the June 12 summit to go ahead, spurring doubts whether the event could even take place.
Meanwhile, in the Eurozone, initial estimates on consumer confidence for May delivered at 1400 GMT could be the next challenge for the euro after today’s flash Markit PMI readings disappointed. According to analysts, the gauge is expected to stand at 0.4% in May as in April – the highest print recorded since February. The political situation in Italy is anticipated to continue to weigh on the euro as the two populist Eurosceptic parties are set to form the next government. Still, the parties need an approval for their proposed candidate, Giuseppe Conte, to be the new Prime Minister.
In other data, New Zealand will see the release of trade figures at 2345 GMT.
Ongoing Brexit negotiations will be in focus in the pound market.
In oil markets, the Energy Information Administration is scheduled to publish its weekly report on US oil inventories at 1430 GMT and it would be interesting to see whether crude oil inventories continued to decline for the third consecutive week. Recall that on Tuesday, the API numbers showed a smaller reduction in US crude stocks for the week ending May 18.
As of today’s public appearances, Minneapolis Fed President Neel Kashkari (non-voting FOMC member in 2018) will be participating in a moderated Q&A session on “New Energy Economic Reality” before the Williston Basin Petroleum Conference at 1815 GMT.
In equities, Ralph Lauren and Tiffany & Co are among companies releasing quarterly results today; both will be reporting before the US market open.
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