Global equities moved higher on Monday as optimism continued to improve on global economic growth.
However, USD remained somewhat subdued in early trading as the outlook for US inflation remains tenuous as restrictive bond yields continue to raise concerns about the Federal Reserve’s strategy to tighten their economic policy. In general, markets think the pace of its tightening will be much slower than policymakers want.
The EUR had little impact following the news over the weekend that Italy began winding up 2 failed Venetian banks on Sunday in a deal that is likely to cost the country nearly €17 Billion. Earlier the German IFO posted a reading of 106.8 better than the consensus of 106.4 and the previous reading of 106.5, showing a continued optimistic view of Eurozone Business confidence. EURUSD traded around 1.1200 after the release and the 7-month high, set earlier this month at 1.1296, could be tested if EUR buying momentum, and typical end of month USD selling gather momentum.
Oil prices moved higher after having fallen for five weeks in a row over concerns OPEC-led production cuts have failed to ease a global crude glut stemming in part from increased U.S. oil production. The Baker Hughes report, issued last week, showed US energy firms added 11 new Oil Rigs in the week to June 23rd. This takes the total rig count to 785 which is the most since April 2014. WTI was trading around $43.60pb and Brent at $46.25pb. Markets believe that $40 will provide some support as US shale production will likely abate if it breeches this level.
USDJPY fell 0.2% to trade around 111.55. GBPUSD added to its 1% four-day gain as sterling moved higher trading around 1.2750. After 3 successive days of gains Gold fell back 0.3% trading around $1,247 in early trading.
US Durable goods will be released today at 13:30 BST and are expected to shoe a 0.6% decline which is likely to indicate that US consumers are only slightly rebounding and inflation is not likely to rise further which, in turn, adds more credence to the Federal Reserve holding off on any near-term rise in US interest rates.
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