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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 04 May 2017 at 7:00 GMT

Morning Markets: USD firms as Fed brushes off weakness

Consulting editor / TradingFloor
Norway







MM TABLE

 

Watchlist

  • Australia: International trade in goods and services (published)
  • France: Services PMI (0750 GMT)
  • Germany: Services PMI (0755 GMT) 
  • Norway: Norges Bank monetary policy decision (0800 GMT)
  • EU: Eurozone services PMI (0800 GMT)
  • EU: Eurozone composite PMI (0800 GMT)
  • UK: CIPS/Markit services PMI (0830 GMT)
  • EU: Retail trade (0900 GMT)
  • Czech Republic: Interest rate decision (1100 GMT)
  • US: Weekly jobless claims (1230 GMT)
  • US: International trade in goods and services (1230 GMT)
  • Canada: International merchandise trade (1230 GMT)
  • US: EIA weekly natural gas storage report (1430 GMT)


The US dollar gained against other currencies after the Federal Open Market Committee issued a statement saying that it believes the recent slowdown in US growth is "likely to be transitory". The FOMC's statement bolstered expectations of a June US rate hike.

Oil prices  — and the whole commodities sector — remain under pressure.

Iron ore led a drop in China commodities prices on Thursday as short-term borrowing costs on the mainland rose further, and the Australian dollar fell to its lowest level in four months as commodity prices weakened.

Facebook shares dropped in after-hours trading after the US social media company’s first-quarter results on Wednesday beat expectations once again.

Norwegian oil and gas group Statoil reported on Thursday a near-quadrupling of profits, beating market estimates.

Market signals

Asian session

  • Smaller-than-expected decline in US fuel inventories pushed crude prices lower
  • Lack of progress on Trump's infrastructure spending promise weighs on commodities
  • Negative lead from Wall St, commodity price weakness weighed on sentiment in Asia
  • Copper prices dipped on rising inventories, hurting miners
  • Tokyo Stock Exchange was closed for a second day, for Greenery Day holiday
  • China's Shanghai Composite clawed back most of its early fall
  • Shanghai Composite was down by 0.05% to 3,133.74 at 0505 GMT
  • People's Bank of China has taken steps to tighten bank lending
  • Hong Kong's Hang Seng was down 0.44% to 24,586.16 at 0512 GMT
  • Australia's trade surplus fell to $3.1bn in March; still third-highest surplus on record
  • S&P/ASX200 was down 0.33% to 5,872.60 at 0508 GMT
  • Korea's Kospi Composite defied gloom; up by 0.70% to 2,235.08 at 0452 GMT

Forex ahead

  • FOMC left open the prospect of a June hike, which gave USD a lift
  • USD gained ground against yen; it was worth ¥112.7710 at 0455 GMT
  • AUD fell heavily on copper price fall; it was worth just 0.7416 at 0455 GMT

From the Floor

Downplaying. “They [the Fed] are sort of downplaying the weak GDP figures for Q1,” says Garnry. “The market is definitely giving the Fed the green light to hike rates once more.” 

Commodities hit. “We are seeing the whole commodities sector under pressure,” says Hansen.


Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1... 2... 3
Retail spending probably remained unchanged in the Eurozone in March, but annual trend should show a welcome 2.1% rise in this key indicator, says James Picerno.

Dollar gains
The US dollar gained against all of the G10 pairs as the Fed maintained its hawkish stance, writes the team at Saxo APAC Sales Trading.

Fed speaker scrutiny
Markets will listen closely for any attempts at managing rate hike expectations when Janet Yellen and her FOMC colleagues take to the speaking circuit on Friday, says Max McKegg.

Red metal rout
Copper prices have fallen sharply, dragging down other industrial metals and the commodity-driven Australian dollar, says the team at Saxo Capital Markets Australia

Credit slowdown
The key factor in financial markets right now is the China-driven credit impulse slowdown, says Saxo Bank's chief economist Steen Jakobsen.

New rules
Russian President Vladimir Putin must recognise that the geopolitical game is being played with new rules, and he risks an international upset over US plans for Syria, says Nadia Kazakova.


The Federal Reserve in Washington

 The Fed has spoken. Photo: Shutterstock


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