The US Dollar (USD) is slightly rising, as shown by the US Dollar Index, but there's no clear trend this week after Monday's flat performance. The market is unpredictable; new surveys suggest former President Donald Trump might win if elections were held today. Stocks are down as investors await Nvidia's earnings report on Wednesday. With more Federal Reserve speakers today, expect a volatile trading session.
Fed's stance dominates market focus
You won't find any first-tier economic indicators grabbing the headlines this week. Instead, all eyes are squarely on the Federal Reserve. A clear message emerged after multiple Fed members spoke on Monday: the Fed remains committed to taking necessary measures to curb inflationary pressures.
While the markets are skeptical of another rate hike imminent, there's a strong expectation that the current restrictive stance will continue for a while longer.
The US Redbook Index dropped from 6.3% to 5.5% for the week ending May 17. This decline has grabbed market attention, especially with seven Federal Reserve members scheduled to speak. At 13:00 GMT, Federal Reserve Governor Christopher Waller said we need several months of good inflation data before considering rate cuts.
Similarly, Federal Reserve Bank of Atlanta President Raphael Bostic didn't expect a rate cut until the fourth quarter.
With his remarks, Federal Reserve Bank of Richmond President Thomas Barkin will start the Investing in Rural America conference. Later, at 1:05 PM GMT, Federal Reserve Bank of New York President John Williams will speak at the 2024 Governance and Cultural Reform Conference.
At 14:45 GMT, Fed Vice Chair Michael Barr will talk at the 2024 Regional State Member Bank Director and Executive Conference. He will discuss the economy, regional banking supervision, and lessons from the 2023 liquidity crisis.
Around 23:00 GMT, the President of the Federal Reserve Bank of Atlanta, Raphael Bostic, will host a speech at the Atlanta Fed's Financial Market Conference dinner. Joining him will be Susan Collins, President of the Federal Reserve Bank of Boston, and Loretta Mester, President of the Federal Reserve Bank of Cleveland.
The morning started quietly for US stocks, but things have changed, and losses are becoming more noticeable. As we go into Tuesday, US stocks follow the negative trend from Europe and Asia.
The CME Fedwatch Tool shows a 96.4% chance that the Federal Reserve will keep the current interest rate in June. However, there's a 49.6% chance of a small rate cut for September. Meanwhile, the 10-year US Treasury Note is trading at about 4.40%, in the middle of this week's range.
Investors eagerly await Nvidia's earnings report, which is due on Wednesday. This shows how one company's performance has become significant. This nervous anticipation suggests no big factors are influencing market sentiment right now. For several weeks, markets have favored a risk-on attitude, generally leading to a weaker US Dollar.
The DXY is nearing critical resistance levels. Initially, it needs to surpass 104.72, which aligns with the 55-day SMA. Following that, keep an eye on the 105.12 and 105.52 marks. Conversely, critical support can be found at the 100-day SMA around 104.20.
Should this support give way, the dollar might swiftly decline between 104.11 and 103.00. If the downward trend persists, the following support levels to watch would be the March low at 102.35 and the December low at 100.62.
Euro and dollar slightly dip
The euro dropped a bit by 0.05% to $1.0852. Investors look forward to Thursday's data from the European Central Bank's wage tracker and the eurozone Purchasing Managers' Index. These reports might give important clues about future monetary policy in the euro area.
After some ups and downs, the US dollar fell by 0.04% against the Japanese yen on Tuesday, ending at 156.20. The dollar-yen exchange rate has been relatively stable recently. This comes after a rocky start to May, possibly due to Tokyo's efforts to strengthen the yen.
The yen recently hit its lowest value in 34 years, dropping to over 160 per dollar on April 29. Concerns about possible action from Japanese authorities have prevented traders from lowering the yen even more.
In cryptocurrencies, ether is seeing its most enormous two-day surge in nearly two years, while bitcoin is getting closer to a record high. This is mainly due to speculation about approving US spot exchange-traded funds tracking ether. Ether rose 6.5% to $3,728.70 after hitting $3,838.80, a level not seen since mid-March. This comes after a 14% jump the previous day, the biggest since November 2022.
Bitcoin also breached the $70,000 mark, trading up 0.25% at $69,707 and nearing its all-time high of $73,803.25 set in March.