Unusual volatility on Tuesday as the U.S. dollar is picking up ahead of the FOMC minutes, euro is slipping lower before the publication of the E.U. Financial Stability Report while the Canadian dollar and oil prices attract market's attention. BoC has an interest rate announcement today while oil is rallying upwards ahead of the OPEC meeting tomorrow that is widely expected to reveal extension of output cuts.
Greenback Raced Up From Speculations that FOMC Minutes Will Signal Rate Hike in June
U.S. dollar raced up against all the majors during the U.S. session on Tuesday, on increased demand for the currency ahead of the FOMC minutes. USD/JPY edged sharply higher to 111.90 trading to its strongest level in five trading days. The traders expect the minutes, that will be released later today, to enclose hints of interest rate rises in the next policy meeting in June. Fed’s Patrick Harker said yesterday that this is quite possible but "a distinct possibility" as another negative surprise from the inflation rate may hold Fed back and delay tightening. Meanwhile, the economic data released was not as optimistic as anticipated. U.S. home sales slumped 11.4% to four-months low to a seasonally adjusted annual rate of 569K in April from an upwardly revised near a nine-and-a-half-year high of 642K in March. The released figure was below market expectations as well as the flash Markit PMIs for May. The manufacturing sector expanded less than expected as PMI came out 52.5 versus forecasts of 53.0 and 52.8 before. In contrast, services advanced to 54.0 beating estimates to keep the same pace of growth with April, of 53.1.
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