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While the dollar traded overall almost unchanged against other major currencies as seen in the performance of the USDX index, in emerging markets many currencies weakened against the greenback with a clear upside seen in pairs like USD/MXN, USD/TRY and USD/INR, while the USD/CNH pair stabilized moderately lower.
Sentiment in the global equity markets was a bit mixed with US indices trailing lower, while European markets like the Europe 50 or Germany 30 ended the day marginally in the green, close to the levels seen over the past days. The Japan 225 (Yen) index reached intraday a new five-weeks high, but settled almost unchanged, while the downside for Chinese stocks continued with the China A50 index again deep in the red with further losses observed by Wednesday morning, when the industrial production and retail sales data for May disappointed. Since the start of the month the China A50 index fell by more than 4 %.
One of the most anticipated events for Wednesday will be the monetary policy announcement by the FOMC. Other potentially significant data releases will include the Canadian CPI, US data on housing starts and permits as well as the development in import and export prices for May. Later in the Asian-Pacific trading session the Bank of Japan (BoJ) announces its interest rate decision, GDP figures from New Zealand will be released, as well as unemployment rate statistics from Australia.
The EUR/USD pair ended the day almost unchanged after a move first pushed the rate higher in the early morning hours only to strongly retrace a few hours later and then by around the time the US trading session move again towards the level seen at the beginning of the day. Despite this volatility, the potential support level around 1.21 remained in place.
European CPI statistics from Germany, France and Italy were mostly unchanged compared to the previous month as expected. The EU trade balance surplus meanwhile significantly reduced from €13.0 billion in the previous month to €9.4 billion as imports increased, while exports declined at the same time.
EU CPI data will be then released on Thursday, as will be the Italian trade balance.
Gold prices headed for the third trading day in a row lower but remained so far above the intraday low from Monday. Silver prices also moved lower, while palladium ended the day marginally higher.
The interest rate decision of the FOMC could be in the focus of many investors on Wednesday. Expectations for an immediate action by the central banking organisation in light of the surging inflation are still low. Still, even if no changes to the rate and asset purchase program would be announced, investors will carefully listen to the nuances during the press conference and how the decision makers seem to be position on actions to be taken over the following months and years. Gold has potential exposure to such a decision due to different factors, such as the influence of rates on the opportunity costs of holding a non-yielding precious metals, the expectations on inflation, the impact on the strength or weakness of the dollar and other influences.
The rally in the oil markets further extended towards a new two-year high, closing in on the high seen over the course of 2018. While the price performance was already positive during most of the day, later in the afternoon the release of the weekly statistical bulletin by the American Petroleum Institute (API) which for the fourth week in a row a decrease in inventories, this time significantly more than expected as crude oil stockpiles fell by more than 8.5 million barrels over the course of the past week.
On Wednesday the Energy Information Administration (EIA) publishes its weekly statistics on crude oil, gasoline and distillate stockpiles.
While the futures-based indices US 500 and US Tech 100 reached a new all-time high during the morning hours on Tuesday, a retracement set in just before the US trading session started with these indices closing in the red that day. The US 30 index, which did not follow the upbeat sentiment over the past days even fell to a new 2-weeks low.
Economic fundamentals released on Tuesday were to some extent rather disappointing like the retail sales data, which declined by 1.3 % on a monthly basis as well as the Empire State General Business Conditions index, which fell from 24.3 in the previous reading to 17.4.
Shares of Oracle dropped in after-hours trading despite the company exceeding set expectations on both earnings-per-share, as well as revenue, which reached $11.23 billion in the quarter. Investors were seen reacting to the reduced earnings guidance.
Given the continued rally in oil prices, the outperformance of energy-related stocks (US Energy ETF +2.13%) compared to the rest of the market should come hardly as a surprise. Exxon Mobil (+3.88%) closed the day in the top 5 of companies included in the S&P 500 index.
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