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The U.S. dollar edged higher once again on Tuesday, with the USDX marking a 0.30% daily gain, and rising further in early European trade on Wednesday as negotiations to end the debt ceiling standoff in Washington seem to be at a dead end. Emerging market currencies appeared mixed against the dollar, with the USD/ZAR pair falling by 0.32%, the USD/MXN adding 0.41% to its value and the USD/CNH posting a 0.21% increase. The Turkish lira continues to flirt with all-time highs, as the tight race for the upcoming elections on Sunday continues. Erdogan seems to have secured 49.52% of the vote against Kilicdaroglu’s 44.88%.
The main stock market indices in the U.S. ended sharply lower on Tuesday, pressured by lack of progress in debt ceiling talks and a jump in short-term Treasury yields. Additional pressure came from comments earlier this week by Fed Presidents James Bullard and Neel Kashkari indicating that the U.S. central bank may need to continue hiking rates if inflation remains elevated.
Sideways trading activity continues in the cryptos front, with the two main cryptocurrencies fluctuating in a tight range for the yet another week, waiting for catalysts that could cause a breakout in either direction. Bitcoin gained by almost 1.37% on Tuesday while Ethereum gained by almost 2%, testing highs seen in the previous week.
Investors are now waiting for minutes from the Federal Reserve's May 2-3 meeting, due later today, to assess the central bank's next likely steps on monetary policy. Other significant news that could possibly bring some volatility on Wednesday include the German IFO business climate report, a speech by BOE governor Bailey, a speech by Treasury secretary Janet Yellen and the weekly crude oil inventories report by the EIA.
The EUR/USD pair resumed its slide and posted a decline of 0.38% ending the session at 1.7695. The pair holds a bearish bias due to recent strength in the US dollar and as the Euro lags.
On Tuesday data from Eurozone mostly came in below expectations, as the Eurozone’s May preliminary PMIs showed a decline in the Manufacturing index at 44,6, which is the lowest level in 36 months. In Germany, the Manufacturing index dropped at a 36-month low while the Service index rose to 57.8.
On the other hand, the US services PMI improved while the Manufacturing PMI fell below expectations.
Looking ahead, market participants will be closely watching the upcoming economic data releases from the Eurozone, the release of the FOMC minutes from the latest Federal Reserve meeting and the ongoing debt-ceiling negotiations in the United States will gather attention.
Gold prices moved slightly higher on Tuesday, closing the day 0.27% higher as markets wait for some progress in negotiations over raising the U.S debt ceiling. Gold has moved in a tight trading band of $1950 - $1980 an ounce for nearly a week after losing the $2000 level, amid continued uncertainty over a U.S debt default.
On Tuesday’s session, gold price fell to $1954 per ounce while the US dollar was recovering, but gold prices managed to find support and staged a comeback as the US Treasury bond yields pulled back sharply from two-month highs amid broad risk aversion.
Oil prices rose on Tuesday, with the WTI contract gaining 2.09% of its value on the iForex Platform, as industry data signalled a sharp drop in U.S. inventories, heralding tighter supplies, although concerns over slowing economic growth and a U.S. debt default persisted.
Data from the American Petroleum Institute (API) showed that U.S. inventories shrank at their fastest pace in nearly six months over the past week. After the recent production cuts by the OPEC began to be felt, a warning from the Saudi Arabian energy minister against shorting oil could also be providing support prices.
Oil prices are still trading down about 6% for the year, hit largely by concerns that worsening economic conditions will stymie a recovery in demand.
Wall Street stocks finished sharply lower on Tuesday and short-term Treasury yields shot up as investor tension grew over a lack of progress in U.S. debt limit talks. The main U.S stock market indices ended the session posting losses with the US 500 and the US Tech 100 losing approximately 1.25% and 1.39% of their value respectively, while US 30 showed losses of 0.81%.
Among the highlights of the session are Broadcom that gained by more than 1.3% after the chipmaker entered into a multi-billion-dollar deal with Apple Inc to use chips made in the United States, and Zoom that fell by more than 8% after the video conferencing platform reported its slowest quarterly revenue growth.
Ahead in Wednesday's session, investors will be looking towards FOMC meeting minutes and a speech from Treasury Secretary Yellen.
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