Two FED members are set to speak today and following the surprisingly hawkish comments released yesterday, the market will monitor their words very carefully. Yesterday USD jumped after FOMC minutes were released. The minutes raised hopes for a June rate hike. Policymakers generally judged that it might be justified to increase interest rates in June if economic data suggest growth were picking up in 2Q16, job market continued to improve and inflation were making progress to reach the +2% target, though some were worried that the data by then might not be sufficient for decision making.
- Stocks: DJIA closed just down -3.35 points overnight and is holding on to key near term support at 17526.62. Asian stocks are mixed. South Korea and Australia led regional markets lower with 0.5 and 0.6 percent falls each as investors refocused their attention on the growing differences between the health of the world’s biggest economy and its global counterparts. Japans NKI rose thanks to a weaker JPY.
- OIL and GOLD: GOLD suffered steep losses as the rate rise expectations helped boost the value of USD and since GOLD is inversely correlated, it dropped by more than $20 in the day. The stronger USD also weighed on commodities such as oil, which saw U.S. crude futures lose 0.4% to $48.00 a barrel. A stronger USD tends to put non-U.S. buyers of greenback-denominated commodities at a disadvantage.
Currencies: EURUSD is also pressing key near term support at 1.1217 now. Meanwhile, the greenback is seen strong against commodity currencies too as AUD/USD extends recent decline. USDCAD also took out 1.3014 resistance as WTI crude oil dips to 47.50 after hitting 48.95 overnight. GBPUSD rallied sharply on Wednesday following a poll on the UK EU referendum that stated that 55% was in favor of ‘remain’ and 37% ‘leave’.
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