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America's Roundup: Dollar gains, euro pressured by Italy uncertainty, Wall Street climbs on trade war truce, Gold hits 2018 low, Oil rallies to multi-year highs on Venezuela worries-May 22nd, 2018


Market Roundup

• Trade war fears ebb as U.S., China agree to continue talks .

• U.S.'s Mnuchin: 'Significant' issues remain over NAFTA .

• Trump presses China on North Korea border ahead of summit.

• Fed's Bostic repeats U.S. close to Fed's inflation, employment goals.

• Harker could back 3 more Fed rate hikes in face of U.S. inflation.

• U.S. Apr National Activity Index, 0.34, 0.10 previous.

• U.S. toughens stance on Iran, lists sweeping demands.

• Venezuela's Maduro faces fresh sanctions after disputed re-election.

• Italy's 5-Star and League propose law professor as premier.

Looking Ahead - Economic Data (GMT)

• No major economic events are scheduled

Looking Ahead - Events, Other Releases (GMT)

• 07:00 Riksbank executive board meeting in Stockholm

• 09:00 Erkki Liikanen, governor of Bank of Finland and member of the ECB's governing council due to hold a public hearing to Finnish lawmakers about monetary policy and economic outlook in Helsinki 

• 12:30 Federal Reserve Bank of Philadelphia issues Nonmanufacturing Business Outlook Survey for May in Philadelphia

Currency Summaries

EUR/USD is likely to find support at 1.1700 levels and currently trading at 1.1789 levels. The pair has made session high at 1.1791 and hit lows at 1.1742 levels. The euro was little changed against US dollar on Monday after the United States and China put their trade differences "on hold" to work on a wider agreement. Washington and Beijing both claimed victory on Monday as the world's two largest economies stepped back from the brink of a global trade war and agreed to hold further talks to boost U.S. exports to China. Over the weekend, the two sides pledged to keep talking about how China could import more energy and agricultural commodities from the United States so as to narrow the $335 billion annual U.S. goods and services trade deficit with China, although details and a firm timeline were thin. U.S. Commerce Secretary Wilbur Ross will travel to China next week to help finalize a trade agreement, Mnuchin said on Monday. Most observers say a firm deal is likely to take a long time. The euro, was flat against the dollar at $1.1791, after earlier falling to its lowest level since around mid-November. Europe's single currency has been affected by concerns about political uncertainty in Italy.This week will bring about a further test for stubborn euro bulls with the release of May flash PMI data on Wednesday, with markets waiting to see whether the first-quarter slowdown in Europe has spilled over to subsequent months.

GBP/USD is supported in the range of 1.3364 levels and currently trading at 1.3427 levels. It reached session high at 1.3440 and dropped to session low at 1.3389 levels. Britain's pound declined against the dollar on Monday as the dollar surged and investors prepared for data this week that could determine whether the Bank of England raises interest rates in 2018.A broad rally by the dollar and dwindling expectations that interest rates will rise have caused what had been one of the best-performing major currencies to give up all its 2018 gains. Sterling slumped half a percent on Monday and fell below $1.34 for the first time since December, before trimming some of its losses. The currency was headed for its biggest daily loss in three weeks as the dollar rose broadly on reports that the United States was putting its trade war with China "on hold. The pound also fell versus the euro, sliding 0.2 percent to 87.64 pence. Important data on the British economy is due out this week including inflation on Wednesday and gross domestic product on Friday. The figures will be scrutinised by investors to gauge whether the BoE might tighten monetary policy as early as August. Risks around the sort of post-divorce relationship Britain can agree with the EU weighed heavily on the pound last week. But the biggest reason for sterling's fall has been a drastic shift in market expectations of when the BoE will raise rates.

USD/CAD is likely to find support at 1.2790 levels and is trading at 1.2790 levels. It has made intraday high at 1.2880 and lows at 1.2790 levels. The Canadian dollar strengthened against its U.S. counterpart on Monday as oil prices rose, while investors turned their attention to NAFTA renegotiations. U.S. Treasury Secretary Steven Mnuchin on Monday said major issues remained in talks between the United States, Mexico and Canada to renegotiate the North American Free Trade Agreement(NAFTA). He added that Trump administration remained focused on crafting a new NAFTA deal that would require congressional approval, but that Trump could consider a possible so-called "skinny deal" that would not. His comments come as talks to rework the 24-year-old trade accord have intensified in recent weeks. Oil prices reversed course from choppier early trading and climbed on Iran and Venezuela concerns. Expectations that U.S. sanctions on Iran could curb the country's crude exports have led crude prices higher in recent weeks, and the market is now weighing the possibility of additional sanctions on Venezuela following its presidential election. The Canadian dollar was last trading at C$1.2789 to the greenback, up 0.6 percent. The currency's strongest level of the session was C$1.2790, while it touched its weakest since last Wednesday at C$1.2867.

USD/JPY is supported around 110.58 levels and currently trading at 110.97 levels. It peaked to hit session high at 111.36 and made session lows at 110.98 levels. The U.S. dollar edged slightly lower against the yen on Monday as news of a truce between the United States and China on trade tariffs prompted investors to pare back short positions on the greenback. Investors have been short the dollar since July of last year, but the dollar index has rallied nearly 7 percent since mid-February. The dollar has been mainly bolstered by generally solid U.S. economic data that has backed the Federal Reserve's monetary policy tightening stance this year. The prospect of a resolution to the U.S.-China trade tensions has further added to the dollar's shine. The world's two largest economies have agreed to drop their tariff threats for now. U.S. Treasury Secretary Steven Mnuchin and President Donald Trump's top economic adviser, Larry Kudlow, said on Sunday the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future. This week, the dollar's fate rests on the Fed, with several of its officials speaking and the minutes of the U.S. central bank's last monetary policy meeting due to be released on Wednesday. Investors will focus on the Fed's inflation outlook. Higher inflation could mean faster interest rate hikes and a stronger dollar.

Equities Recap

European shares rose on Monday as easing trade war worries lifted the dollar, supporting exporters, while Italian stocks came under renewed pressure as markets awaited developments in the creation of a new government.

UK's benchmark FTSE 100 closed up by 1.2 percent, the pan-European FTSEurofirst 300 ended the day up by 0.29 percent, France’s CAC finished the day up by 0.5 percent.

U.S. stocks rallied on Monday after the United States and China put their trade differences "on hold" to work on a wider agreement, while sentiment was also boosted by the nearly $28 billion worth of merger deals.

Dow Jones closed down by 1.20 percent, S&P 500 ended up by 0.73 percent, Nasdaq finished the day up by 0.53 percent.

Treasuries Recap

U.S. Treasuries were steady on Monday as investors evaluated whether last week’s selloff that sent benchmark yields to almost 7-year highs was overdone, and before demand for U.S. debt will be tested by new supply.

Two-year note yields, which are the most sensitive to rate hikes, rose as high as 2.598 percent on Thursday, the highest since August 2008, before falling back to 2.569 percent on Monday.

Benchmark 10-year note yields rose to 3.128 percent on Friday, the highest since July 2011, before falling back to 3.069 percent on Monday.

Commodities Recap

Gold on Monday marked a new low for the year to date after U.S. Treasury Secretary Steven Mnuchin's declaration that a trade war between China and the United States was "on hold" helped boost appetite for higher-risk assets, such as stocks.

Spot gold fell to its lowest since late December at $1,281.76 an ounce, and was down 0.03 percent at $1,291.1 per ounce by 1:34 p.m. EDT (1734 GMT). U.S. gold futures for June delivery settled down 40 cents, or 0.03 percent, at $1,290.90 per ounce.

U.S. crude hit its highest level since 2014 on Monday amid rising concerns that Venezuela's oil output could fall further following the country's presidential election and potential sanctions on the OPEC-member nation.

U.S. crude futures settled 96 cents, or 1.4 percent, firmer at $72.24 a barrel, after touching $72.33, the highest since November 2014. In post-settlement trade, the benchmark hit a fresh 3-1/2 year high at 72.41.Brent crude futures gained 71 cents, or 0.9 percent, to settle at $79.22 a barrel.
 

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