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The US dollar declined quite noticeably for the second day in a row against other major currencies as indicated by the USDX index reaching the lowest level since January. As the dollar weakened, some emerging market currencies continued improve by comparison with for example the USD/ZAR pair trading more than 4.5 per cent lower since the beginning of the month and close to its low from July 2019. However this sentiment was not shared by the Turkish lira with the USD/TRY pair trading very close to 8.5 on Tuesday, edging again close towards the historical high of this currency pair. The lira might have been impacted by the decision of the Turkish President to replace a deputy governor of the country’s central bank.
Cryptos were also bullish by Wednesday morning, with Bitcoin finally able to pass above the $40k mark again for the first time since Friday. The relative performance of some altcoins was even more positive with tokens like Ethereum, Litecoin and Ripple all gaining double digit percentages after midnight GMT. The total market cap of the crypto market was estimated now above $1.8 trillion, while the BTC dominance declined to around 41 per cent.
Sentiment in the global equities markets was a bit mixed on Tuesday with indices like Germany 30 initially reaching a new record, only to close lower at the end of the day. Still, this might be viewed as a pause from the uptrend of the past days and not a clear indication where the market would go next. The China A50 index on the other hand rallied to a new two months high, gaining more than four per cent in that trading day. Especially tech shares in this market were seen as key contributor to this price growth.
Relatively few fundamental data releases are scheduled for Wednesday besides the weekly energy commodity data from the EIA and mortgage market statistics from the MBA.
The weakness of the dollar propelled the EUR/USD pair towards the highest level since January, while the euro strength in other markets like EUR/JPY or EUR/GBP was also a contributing factor.
After disappointing GDP data coming from Germany for the first quarter, the Ifo survey on business expectations significantly improved in the latest reading, rising towards 102.9 from 99.5 earlier.
US data on house prices was again confirming an inflationary pattern with the FHFA House Price Index rising by 1.4 per cent in March alone and the S&P/Case-Shiller index reported up by 13.3% on an annualized basis. The number of new home sales however strongly declined by more than 15% compared to the previous month, reaching only 863 thousand in April.
Gold prices continued to rally higher by Wednesday morning after touching on the $1,900 mark for the first time since January on Tuesday evening. Silver prices also followed the sentiment but remained so far below the high from the previous week. Platinum and palladium also started to recover from the recent slump.
Multiple factors might have influenced the price move, such as a weak dollar, some disappointing fundamentals from the US and potentially also rising inflationary pressures, while at the same time the long-term bond yields on US Treasuries remained relatively stable or even declined over the past days.
Some key economic data can be expected towards the end of the week. Potentially the PCE price index due on Friday could be a factor traders should watch out for. The Federal Reserve uses this measure as a way to asses the inflation of the economy and formulate their monetary policy taking that also into account.
While oil prices such as the WTI crude oil benchmark edged again higher intraday, reaching as high as $66.5 per barrel, at the end of the day prices settled close to unchanged compared to the previous trading day.
The reported decline of crude oil inventories by a bit more than 400 thousand according to data from the American Petroleum Institute (API) might have been a ben lower than anticipated, but oil markets could have also responded to the relatively higher draw in gasoline and distillates over the weekly period.
TSA checkpoint travel numbers are also observed by some investors in the energy markets as one of many indicators for demand. For example the 1.75 million travellers reported for Monday was again a higher number than reported on the Monday before and the weeks earlier.
On Wednesday the Energy Information Administration (EIA) will release as usual its weekly data on crude oil gasoline and distillate inventory changes.
After the rally on Monday, the sentiment in US stock markets was again mixed. The US Tech 100 index managed to close higher, while other indices like the US 500 or US 30 moved moderately lower.
Fundamentals might not have altogether have supported a bull case as for example the Conference Board’s latest reading on consumer confidence declined more than anticipated from 121.7 down to 117.2.
Some of the best-performing stocks in the S&P 500 index were cruise companies on Tuesday with Royal Caribbean (+3.64%), Norwegian (+3.50%) and Carnival (+2.41%) filling the top 5 positions of the day.
Towards the second half of the week again a bit more earnings can be expected, such as from companies like Snowflake, Okta, Nvidia and Zuora on Wednesday and Dollar General, Best Buy, Costco and Salesforce.com on Thursday.
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