The US session is likely to be eventful, with US economic releases due today, such as ADP Employment and Q1 preliminary GDP data among other minority reports. A Fed’s June rate hike is still possible, however, a big miss on the US GDP figure and/or further worsening of the political situation in Italy could lower the probability of that happening, affecting the US dollar rally.
USD/JPY recovers its losses, possibly due to an uptick in the treasury yields with the pair possibly move back above 109.00 if the US first-quarter preliminary GDP reading beats estimates. The yields and the US dollar could also take cues from the US ADP employment figure.
The day sees a relatively busy EUR calendar, with the German retail sales release to kick-off the early European trading. The Spanish flash CPI, Swiss datasets and German employment data will be reported as well, but the main event risk in Europe remains the German preliminary CPI report. The EUR/USD pair fell to 1.1510 on Tuesday – the lowest level since July 20, 2017. A corrective rally could be in place, if the Italian bond yields drop and the German preliminary CPI for May beat estimates. The currency pair has been hit hard in the last couple of days on fears that fresh elections in Italy may deliver a stronger mandate to anti-EU parties.
The GBP/USD is trading flat ahead of Wednesday’s London session, cycling near 1.3250. Tuesday saw the Sterling drop off the 1.3300 major level hitting a low of 1.3204, but the pair managed a slight recovery. Wednesday is a dry showing for the GBP/USD, with only the GFK Consumer Confidence Index for May releasing at 23:00 GMT.
Crude oil is continuing to trade relatively flat after getting knocked back recently, and WTI crude is trading just above 66.50 for Wednesday. Oil traders have balked at the news that Russia and the OPEC consortium plan to lift production limits in the coming months and the news, combined with the recent bout of risk aversion that has swept through markets, has seen crude prices decline rapidly. For today, the US API weekly crude stockpiles data will be eyed for fresh oil-price trades.
Gold prices struggled to find direction as haven-seeking capital flows buoyed the US Dollar and Treasury bonds in tandem, weighing on yields. While rising political uncertainty in Italy and growing U.S.-China trade tensions should see gold holding a bid, but with the yellow metals sensitivity to the US dollar is on full display, it is unlikely Gold will move significantly higher.