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Overall foreign exchange markets moved on Tuesday towards a stronger dollar as seen in the performance of the USDX, but there were different sentiment across markets. The USD/TRY pair continued to move lower and the USD/MXN momentum also continued to the downside, pushing the exchange rate towards a new four-months low. On the other hand the USD/ZAR and USD/INR pairs were seen higher over the past few days.
After another round of sell-offs cryptos managed to recover with Bitcoin trading again above $34k by Wednesday morning and the total crypto market cap now seen above $1.55 trillion. It is not clear if the move by El Salvador as the first country in the world to adopt Bitcoin as legal tender was a factor in the recovery. While the BTC dominance remains just under 40%, the BTC/ETH rate rose from Tuesday night until Wednesday morning by around 4.7%.
Most major equity indices in the US and Europe traded on Tuesday either close to unchanged or moved lower like the Germany 30 and even the rallying Italy 40 index took a break and was at the end of the day almost unchanged. In Asia some downside was seen in indices like the China A50 and the Japan 225 (JPY). Some see the rising inflation as a potential factor affecting the markets as the Chinese PPI rose to 9% annually, the highest rise since the global financial crisis in 2008.
On Wednesday the Bank of Canada (BoC) will announce its monetary policy decision. While an immediate rate change is not expected, and given the still fragile economy it is seen as doubtful but far from impossible that after the surprise last month another hawkish stance should be expected.
The euro traded a bit lighter against the greenback on Tuesday in line with the overall market trend that day. Compared to other majors the euro noticeably appreciated against the New Zealand dollar, while a drop was observed in the EUR/CHF rate, which fell to a new three-months low.
The German trade balance statistic released for April, which was released on Wednesday morning indicated only a moderate rise in trade surplus compared to the previous month, reaching €15.9 billion as exports marginally improved, while imports were down.
Now the monetary policy decision by the European Central Bank (ECB) due on Thursday might be in the focus of investors.
While gold prices spiked briefly above $1,900 before the opening of the US stock markets, for the most part the gold price remained below that level and was seen by Wednesday morning around where prices closed at the end of last week.
A decline was also clearly observable in other precious metals markets such as silver and platinum. Palladium prices also pulled lower in a quite volatile trading session with a daily range of price movements in excess of four per cent.
With rising inflation being seen of increasing concern, investors might want to pay even more attention than usual of data releases, such as the US CPI for May, that will be published on Thursday with expectations that the consumer price inflation will further increase compared to the 4.2 % p.a. published in the previous month.
Oil prices recovered on Tuesday and moved towards a new post-pandemic high, with a barrel of WTI crude oil now clearly trading above $70.
One potential factor affecting the supply side might have been the news of the stalling talks with Iran and the US Secretary of State Blinken being quoted that even if both sides return to the nuclear deal (JCPOA), hundreds of sanctions against Iran would still remain in place.
Prices moved again higher on Wednesday night in spite of the smaller than expected build on crude oil stockpiles of just over two million barrels over the past week according to data released by the American Petroleum Institute (API), while gasoline and distillate stockpiles were seen higher. On Wednesday the usual weekly numbers will also be published by the Energy Information Administration (EIA).
Major stock market indices ended the trading day on Tuesday almost unchanged after the initial gains in the futures markets were quickly lost in the hours after the opening of the US markets only for the market move towards a neutral position in the evening.
One of the worst performers in the market was the memory chip company Micron (-4.14%). Some see the stock price being affected by a report from Edgewater Research that changes in both inventories and demand patterns could lead to lower DRAM prices in the second half of 2021.
The best performing stock in the NASDAQ 100 index for the day was SiriusXM (+7.59%), reaching the highest valuation since January.
A few earnings are also expected these days, such as from Campbell Soup on Wednesday and Chewy on Thursday.
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