The Dollar declines seem to be getting faster, as it crushes a crucial bulls’ foothold at the level of 100, fuelling speculations about a trend reversal in the medium term. The “sell on facts” rule worked flawlessly at the FED meeting last week, as the markets focus was on FED Chairman Yellen statements rather than on the hike that already has a high probability. Trump’s release of the fiscal plan showed that the president intends to increase the defence spending by slashing the expenses of other areas, raising doubts that the government can find money for infrastructure spending, without significantly increasing the deficit.
The increase in the borrowing rate also left a footprint on the fixed-income markets. The yield on 10-year US treasury bonds continued to decline this week, reflecting the slowdown in the inflation projections. After a solid rally in the end of February, when the active discussion of the March increase began, the yield then plummeted as the FED’s decision came out, but not so rapidly as the fall of the US currency. Inflationary expectations are still high and this is confirmed by FED rate futures, projecting 57% likelihood of four increases this year. In the light of this news, Dollar has shown significant prospects for growth and after a pullback, to the level of 97-98, it may be appropriate to resume bidding. However, economic data now enters the game as the main tool for predicting the FED’s further actions. This week, the key data should be the durable goods orders and the speech by the head of the Federal Reserve at a conference of community development that may contain new details about the future policy.
Shorts continue to dominate the Oil market, as statements that OPEC is not going to give way to US Oil companies have undermined the investors’ hopes for a further market recovery. Saudi Arabia has shifted from cuts to an increase in production, which sharply reduces the possibility that the quota for production will be extended at the Oil officials meeting in May. Both crude Oil grades plunged more than 1 percent at the time of writing, indicating a possible renewal of the lows this week.
The British Pound rose above the level of 1.24 after the Bank of England decision last week, which showed a lack of cohesion among the officials regarding the course of policy. One of the participants in the meeting voted for a rate hike, which increases the chances of tightening the policy at the next meeting. However, the use of Article 50 of the Lisbon Agreement to initiate the Britain withdrawal from the EU can play a cruel joke with the Pound, and purchases with current levels look very risky.