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Stocks rebounds after Fed minutes

 

“Design is not just what it looks like and feels like. Design is how it works.” — Steve Jobs 

 

 

HEADLINES

 

  • Dollar rises off of 1-month low ahead of Fed minutes
  • Gold falls as dollar strengthens ahead of Fed minutes
  • Oil edges higher on tight supply, rising U.S. refining activity
  • Stock and bond divergence offers hope for battered 60/40 portfolio
  • UK stocks end higher; Pets at Home tops midcaps
  • EUR/GBP set to advance nicely above key resistance at 0.8618/21 – Credit Suisse
  • GBPJPY Near Term: Downside favored

 

 

FOREX

 

 

Dollar rises off of 1-month low ahead of Fed minutes

The U.S. dollar snapped a two-day losing streak on Wednesday ahead of the release of the minutes from the U.S. Federal Reserve’s May meeting, which investors will parse for clues about further interest rate hikes.

U.S. 10-year Treasury yields, which hit 3-1/2-year highs earlier in May, have since fallen some 40 basis points. Treasury yields briefly hit six-week lows on Wednesday after data showed new orders for U.S.-made capital goods rose less than expected in April.

The U.S. dollar index, which measures the greenback against a basket of peer currencies, was up 0.491% at 102.25, at 10:15 a.m.

 

 

COMMODITIES

 

 

Gold falls as dollar strengthens ahead of Fed minutes

 

 

Gold prices dropped more than 1% on Wednesday and were on track to snap a five-session winning streak, weighed by a rebound in the dollar ahead of the release of the U.S. central bank’s minutes from its May meeting.

The dollar gained 0.4%, after hitting its lowest level in a month on Tuesday. A stronger dollar makes gold more expensive for overseas buyers.

Even though gold is often seen as a hedge against inflation, rate hikes erode its appeal as they tend to lift bond yields, raising the opportunity cost of holding zero-yield bullion.

 

 

ENERGY

 

 

Oil edges higher on tight supply, rising U.S. refining activity

 

 

Oil prices rose on Wednesday, buoyed by tight supplies and as U.S. refiners drove processing activity to their highest level since before the coronavirus pandemic started.

U.S. crude stockpiles fell 1 million barrels last week, the government said, with gasoline inventories also sliding modestly. Distillate stocks rose by 1.7 million barrels. Refiners picked up the pace of processing, boosting capacity use to 93.2%, its highest since December 2019.

 

 

STOCKS

 

 

S&P 500 rises after Fed minutes show the central bank could hike rates further than expected

 

 

Stocks rose on Wednesday after the minutes of the Federal Reserve’s May policy meeting showed the central bank is prepared to raise rates further than the market had anticipated.

The minutes from the Fed’s May 3-4 meeting showed officials saw the need to raise rates quickly, and possibly more than the market has priced in, to quell the recent inflationary pressures.

“Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” the minutes stated.

 

 

UK stocks end higher; Pets at Home tops midcaps

 

 

UK stocks rose on Wednesday as investors' mood steadied after a bruising previous session, while pet supplies retailer Pets at Home topped midcap stocks after posting upbeat corporate earnings.

The blue-chip FTSE 100 index (.FTSE) was up 0.5%, with commodity majors providing the biggest boost.

 

 

ANALYSIS

 

 

EUR/GBP set to advance nicely above key resistance at 0.8618/21 – Credit Suisse 

 

 

“EUR/GBP is still capped below major resistance at the 38.2% retracement of the September-2020/March-2022 fall and recent high at 0.8618/21 and is pulling back again this morning. Nevertheless, the pair maintains a large base, weekly MACD is close to confirming a cross into outright bullish territory and medium-term moving averages are now rising, therefore, our bias remains for an eventual closing break, with resistance then seen next at 0.8654/59 and beyond.” 

“First support is seen at 0.8434/26, then the 55-day average just below 0.8411/0.8393, with fresh buyers expected here if reached.”

 

 

CHART

 

 

GBPJPY Near Term: Downside favored

Technical View: Short position below 161.3. Target 157.85. Conversely, break above 161.3, to open 162.35.

Comments: The pair is expected to resume descent after correction.

 

 

 

 

Source: Trading Central 

 

 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar


Footnotes


https://www.cnbc.com/2022/05/25/forex-markets-dollar-reserve-bank-of-new-zealand.html
https://www.cnbc.com/2022/05/25/gold-markets-dollar.html
https://www.reuters.com/markets/commodities/oil-prices-climb-prospects-tighter-supply-demand-rises-2022-05-25/
https://www.reuters.com/markets/europe/stock-bond-divergence-offers-hope-battered-6040-portfolio-2022-05-25/
https://www.reuters.com/markets/europe/uk-stocks-end-higher-pets-home-tops-midcaps-2022-05-25/
https://www.fxstreet.com/news/eur-gbp-set-to-advance-nicely-above-key-resistance-at-08618-21-credit-suisse-202205251224