As the day begins, the USD, oil prices, and equities are moving higher while bond yields are trading lower. The dollar surged ahead of the FOMC announcement due to growing hawkish expectations but corrected post-statement. The Fed's revised dot plot, showing 25-50bp cuts for 2025, is still more hawkish than market expectations. The Fed's concerns over inflation and unemployment signal no immediate dovish shift.
News Headlines. President Trump's plan to boost U.S. shipbuilding by imposing hefty fees on China-linked ships is leading to rising U.S. coal inventories and causing uncertainty in the agriculture market, as exporters face shipping challenges. Trump is drafting an executive order to impose fines of up to $1.5 million on China-made ships or those with China-made vessels. President Trump had a positive call with Ukraine’s Zelensky on peace and US ownership of the Zaporizhzhia plant, contrasting with their tense White House meeting. Meanwhile, military officials met in Paris to discuss an international security force for Ukraine to deter future Russian aggression if a ceasefire is reached. At least 70 Palestinians were killed and many wounded in Israeli airstrikes on Gaza Thursday, following the resumption of bombing and ground operations. The strikes targeted several houses, with the Israeli military stating it was investigating the reports. Protests have erupted in Turkey following the detention of Istanbul Mayor Ekrem Imamoglu, a key presidential candidate and rival to Erdogan, on charges of corruption and aiding a terrorist group. This has led to a nearly 5% drop in the TRY.
In currency markets. JPY remains supported as bets on Bank of Japan interest rate hikes grow, driven by strong wage growth and potential inflation. The JPY's safe-haven appeal is also bolstered by uncertainties over US trade policies and geopolitical risks. In the Asian currency market, the USD gained on the CNY 0.22%, KRW 0.51%, THB 0.26% while it lost ground to the MYR 0.23%. The AUD weakens 1.02% against the USD, reversing previous gains. This follows a disappointing domestic employment report. NZD/USD continues its decline (-0.70%) for the third day, New Zealand's economy has emerged from recession. The ZAR and MXN have depreciated by 0.71% and 0.31%, respectively, against the US Dollar.
In commodity markets. US crude inventories rose by 1.75M barrels, while gasoline stocks hit their lowest since January. The Energy Secretary sees current prices (+0.15%) as a chance to refill the Strategic Petroleum Reserve, now at 396M barrels, well below its 2021 peak. Gold retreats after hitting a new all-time high, snapping a three-day winning streak. However, expectations of Fed rate cuts and concerns over Trump’s trade policies and Middle East tensions may support gold, limiting further declines. Agriculture futures are pointing lower with Wheat down 0.54%, Soybean 0.41% and lumber 0.53%.
Current level USD Index 103.863 Up 0.42%
USD/CAD a stronger USD coupled with lower oil prices are pressuring the Loonie.
Current level USD/CAD 1.4379 Up 0.37%
EUR/CAD has been trading within a tight range over the past week, consistently finding support near the 1.5600 level.
Current level EUR/CAD 1.5590 Down 0.18%
EUR/USD Lagarde warned US tariffs could reduce Eurozone growth by up to 0.5%, potentially prompting more ECB rate cuts. She expects a temporary inflation rise, which will ease as economic activity slows.
Current level EUR/USD 1.0840 Down 0.57%
GBP/EUR holds near 0.8390 as the Pound weakens after UK job data. The Bank of England is expected to keep rates at 4.5%, with cuts likely later. Germany's new spending plan may support the Euro.
Current level GBP/EUR 1.1938 (0.8375) Up 0.13%
GBP/USD holds steady after UK labor data showed the unemployment rate at 4.4%, with 144K jobs added, above the previous 107K. Average earnings rose 5.9%, in line with expectations.
Current level GBP/USD 1.2943 Down 0.46%
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