Forex today: DXY gallops on Trump's budget and Mnuchin's comments

Ross J Burland FXStreet

The Forex space today was fairly subdued following the Manchester bombing overnight and markets waking up to the horrific news.

The Manchester bombings are just the latest set of atrocities that have rocked the peaceful world this year. Salman Abedi has been named as the terrorist who was killed in the blast as he murdered 22 after Ariana Grande concert. ISIS claimed today that one of its fanatics was responsible for the massacre within a ranting message that threatened further attacks on 'worshippers of the Cross'. While the pound was jittery on the news and PM May's Cobra meetings taking priority over her election campaigning, risk appetite soon returned on Wall Street.

Wall Street rallied along with the US dollar when the announcement of Trump's budget plan was taken as a positive. US Treasury's Mnuchin's comments, when he said that he hopes to get tax reform completed this year, initiated a sell-off in t-bills and the 10y-yields took off to 2.2887% to settle circa 1.50% higher for the day. The DXY managed a score through the 97 handle to the highs of 97.41 from a low of 96.80. Gold took a battering and was down -0.69% by the close having dropped from highs of $1,263.88 to $1,250.80 the low, recording a 9.21% gain for the year so far. Sterling was down -0.30% at 1.2961 having lost the 1.30 handle from highs of 1.3034. The cross drifted lower on dollar flows from 0.8675 to 0.8618 the low and ended down -0.2%. The euro was lower by 0.49% despite strong date and the Yen lost out to risk on markets by 0.45%.

"Data releases pointed to healthy Q2 growth in developed economies, with the Markit euro area composite PMI holding at its record high (56.8). The German manufacturing PMI made a record high (59.4) and the US PMI also pushed higher on the back of better services activity. Calls that global growth has peaked look premature based on these indicators" explained analysts at ANZ noting that the S&P 500 index was up 0.3% at the time of writing, while the DAX and CAC 40 closed up 0.3% and 0.5% respectively. "The FTSE 100 edged lower (-0.2%). Oil managed to hold onto recent gains with WTI up 0.7% at $51.5/bbl."

Key events ahead

No major events scheduled for Asia:

GMT	Event	Consensus	Previous
Tuesday, May 23
20:30	USD API Weekly Crude Oil Stock		0.882M
21:00	USD FOMC Member Harker Speech
22:45	NZD Trade Balance (MoM)	$268M	$332M
22:45	NZD Exports		$4.65B
22:45	NZD Trade Balance (YoY)		$-3.67B
22:45	NZD Imports		$4.31B
Wednesday, May 24
00:00	JPY Bank of Japan Governor Kuroda Speech
00:30	AUD Westpac Leading Index (MoM)		0.1%
01:30	AUD Construction Work Done	-0.2%	-0.2%
05:00	JPY Leading Economic Index		105.5
05:00	JPY Coincident Index		114.6
06:00	EUR Gfk Consumer Confidence Survey	10.2	10.2

Key notes from US session

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

EUR/USD meets initial support around 1.1800

EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.

GBP/USD bounces off lows, retargets 1.3550

After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.

Gold remains offered below $5,000

Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.

RBNZ set to pause interest-rate easing cycle as new Governor Breman faces firm inflation

The Reserve Bank of New Zealand remains on track to maintain the Official Cash Rate at 2.25% after concluding its first monetary policy meeting of this year on Wednesday.

UK jobs market weakens, bolstering rate cut hopes

In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.

Ripple slides to $1.45 as downside risks surge

Ripple edges lower at the time of writing on Tuesday, from the daily open of $1.48, as headwinds persist across the crypto market. A short-term support is emerging at $1.45, but a buildup of bearish positions could further weaken the derivatives market and prolong the correction.