Macro Roundup (May 20)

SHANGHAI, May 20 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar gained ground on Wednesday, snapping a four-day losing streak and bouncing off a multi-month low following the release of the minutes from the Fed's most recent monetary policy meeting.

In those minutes, a number of members of the U.S. Federal Reserve's Federal Open Market Committee (FOMC) said that should the economic recovery continue to gain momentum, it would be appropriate "at some point" to discuss tightening its accommodative policy, giving the greenback a boost.

"The big thing from the Fed minutes is the mention of beginning of taper talks," said Chris Gaffney, president of world markets at TIAA Bank in St. Louis. "Any mention of the Fed stepping in and raising rates will have a major impact on the dollar."

Still, the minutes were from a meeting that occurred before the release of key economic data, which showed further weakness in the labor market and price spikes driven by a supply/demand imbalance.

Since then, the Fed has repeatedly offered assurances that surging prices in the near term will not translate to long-term inflation.

On Wall Street, stock futures fell slightly in overnight trading on Wednesday after major averages registered a third straight day of losses amid a drop in cryptocurrency prices.

Futures on the Dow Jones Industrial Average dipped 80 points. S&P 500 futures and Nasdaq 100 futures both fell 0.3%.

Shares of Cisco dropped 5.5% in extended trading after the data center networking hardware maker issued weaker-than-expected earnings guidance for the current quarter.

The moves in futures followed a roller-coaster session on Wall Street triggered by a sudden drop in bitcoin price, which led to a sharp sell-off in many speculative areas of the market. Cryptocurrency-linked shares, including Tesla, Coinbase and MicroStrategy, led the market decline as bitcoin tanked as much as 30% Wednesday.

Oil prices fell by over $2 on Wednesday on renewed demand concerns as coronavirus cases in Asia rise and on fears rising inflation might lead the U.S. Federal Reserve to raise interest rates, which could limit economic growth.

Brent crude futures fell $2.22, or 3.2%, to $66.49 per barrel. It settled 1.1% lower on Tuesday after briefly climbing above $70 earlier in the session.

US West Texas Intermediate (WTI) crude futures dropped $2.30, or 3.5%, to $63.19 per barrel, following a 1.2% fall on Tuesday.

Brent’s rise to $70 was driven by optimism over the reopening of the U.S. and European economies, among the world’s biggest oil consumers.

But it later retreated on fears of slowing fuel demand in Asia as COVID-19 cases surge in India, Taiwan, Vietnam and Thailand, prompting a new wave of movement restrictions.

Gold fell on Wednesday from a more than four-month high it hit earlier in the session as the dollar and US Treasury yields rose after minutes from a Federal Reserve meeting showed the central bank might be inching closer to taper talks.

Spot gold eased 0.1% to $1,866.64 by 3:34 p.m. EDT (1934 GMT), having earlier risen as much as 1.2% to its highest since Jan. 8 at $1,889.75. U.S. gold futures settled up 0.7% at $1,881.50.

Some Fed officials appeared ready to begin considering changes to monetary policy based on continued rapid progress in the economic recovery, according to the Fed minutes.

“Gold whipsawed in a volatile session, rallying nearly $40 amidst market chatter of central bank interest before retreating after the Fed minutes indicated that ‘a number of participants’ suggested taper discussions might be appropriate if the economy continued to make rapid progress,” said Tai Wong, head of metals derivatives trading at BMO.

“Even though we are months away, the market is showing its sensitivity to a Fed change,” he said. “The new short-term range is $1,850-$1,890.”

UK inflation more than doubled in April, the Office for National Statistics said Wednesday. Consumer prices rose by 1.5% after a 0.7% climb in March.

Key economic data slated for release today include China Swift RMB's share of global currency transactions in April, Germany April PPI, Philadelphia Federal Reserve Manufacturing Index in May, the number of initial jobless claims in the US as of May 15, monthly rate of leading indicators of American conference board in April and EIA natural gas inventories in the US as of May 14.