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31
May

French GDP and CPI, ECB Financial Stability Review, JOLTS Job Openings

calendar 31/05/2023 - 07:53 UTC

The U.S. dollar continues to trade in a tight range against most major currencies on Tuesday, with the USDX ending the day with almost no change once again. A new high was recorded against the Turkish lira, as the greenback is seen moving higher into positive territory and gaining 2.32% on Tuesday, hitting the 20.93 level, only to retrace later to end the session at 20.63.

Subdued trading continues in Wall Street as well, as investors appear to be on standby, waiting for further developments on the U.S. debt ceiling situation. The agreement announced earlier this week to lift the $31.4 trillion U.S. debt ceiling and achieve new federal spending cuts passed an important obstacle late on Tuesday, as it now went to the full House of Representatives for debate and an expected vote on passage on Wednesday. The main U.S. stock market indices barely moved on Tuesday with the US 500 and the US 30 losing 0.14% and 0.30% respectively while the US tech 100 gained by a mere 0.25%.

Some of the main equity indices in Asia fell sharpy on Tuesday, having largely erased their gains for the year. This came amid increasing uncertainty over a recovery in China, Asia’s largest economy, following news that Chinese manufacturing activity shrank for a second straight month. The China A50 fell by 0.82%, the Hong Kong 50 dropped by 1.22% and the Japan 225 lost 0.42% of its value.

Negative sentiment is observed in the energy market as well, mainly attributed to worries of slowing demand from top oil importer China after the release of weaker-than-expected economic data. The WTI contract fell sharply by 4.56% on Tuesday and Brent fell by 4.13%.

On Wednesday, the ECB could provide some insight on monetary policy plans during its financial stability review. Within the day, German unemployment change will be released, France will publish preliminary growth (GDP) and inflation (CPI) data while later in the day, the JOLTS job openings report is due from the U.S. along with several speeches from Fed members. Ahead in the week, Friday’s non-farm payrolls data will be in the spotlight.

EUR/USD

The Euro posted a moderate increase of 0.23% against the dollar on Tuesday. The market sentiment remains fragile amid worries about slowing global economic growth and a possible U.S. default, should the debt ceiling agreement not get a majority vote by the house of representatives.

The Euro managed to post a small rebound from multi-weeks lows despite the disappointing Euro Area Economic sentiment report, which showed that sentiment decreased from 99 to 96.5 in May.

The economic calendar today is dominated by national CPI releases from several major European countries ahead of Thursday's flash eurozone inflation number, the release of Chicago PMI and JOLTS job openings data.

EUR/USD

Gold

Gold prices ended the session at two-week highs on Tuesday ending the session 0.88% higher. After a persistent slide since mid-May gold traded higher amid tensions over whether the U.S debt ceiling deal between the white house and Republicans will get through congress.

The focus now is on the U.S economic readings with nonfarm payrolls data for May, due on Friday, set to largely factor into the Federal Reserve’s plans for more rate hikes. Rising interest rates push up the opportunity cost of investing in non-yielding assets, a trend that battered gold through 2022.

Gold

WTI Oil

Oil prices fell more than 4% on Tuesday amid concerns whether the U.S congress will pass the U.S debt ceiling and as mixed messages from major producers clouded the supply outlook ahead of the upcoming meeting of the OPEC+ this weekend.

Oil prices tumbled ahead of the debt deadline that nearly coincides with the June 4 meeting of OPEC+ where traders appear uncertain on whether the group will increase output cuts as a slump in prices weighs on the market.

Chinese manufacturing and service sector data out later this week will also be scrutinised for cues on the fuel demand recovery in the world's top oil importer.

WTI Oil

US 500

U.S main indices traded in a tight range during Tuesday’s session as market participants weighed the likelihood of U.S congress passing a debt deal ahead of a vote on the legislation as early as Wednesday. The US 30 and US 500 posted minor losses on Tuesday ending the session 0.30% and 0.14% lower respectively. The US Tech 100 ended the session slightly higher posting 0.25% gains.

On the economic front, data showing consumer confidence in May topped economists’ forecast, underpinned ongoing bets for another Federal Reserve rate hike next month.

Ahead in Wednesday's trade, market participants will be looking towards fresh JOLTs Job Openings, Chicago PMI, Beige book, as well as speeches from FOMC members Bowman, Harker, and Fed Governor Jefferson.

US 500

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