The USD was trading relatively flat for most of the day yesterday with a few skirmishes by both bulls and bears as they tried to take the lead. However, it was the speech by Donald Trump that did the trick to ignite volatility in late trade yesterday. Trump stated that he is in favor of lower interest rates and that he viewed the USD as being overvalued. The market reacted instantly as we saw the USD being dumped across the board with the GBPUSD making highs of 1.2575 as buyers threatened the all-important 1.2600 resistance level which has held for several months. The EURUSD managed to peek above 1.0675 while the USDJPY extended on its 2017 lows to trade just above the 108.75 support level.
Combining Trumps comments with the increase in geopolitical tension and the approaching long weekend it is likely that the USD will remain week unless the upcoming economic data can impress traders enough to have the sentiment changed. The key data for today, which will certainly be watched by the FED who have adopted a wait and see stance in whether to increase interest rates in June, is as follows; PPI m/m, Unemployment Claims and Prelim UoM Consume sentiment. A majority of better than expected releases will see the USD stabilize as market see cause for further strength in anticipation of a rate hike while a majority of worse than expected results will see the USD continue to weaken as all factors begin to elude to a prolonged troubled period for the USA.
In commodities, gold has strengthened to make new 2017 highs as it peeked above 1285 on the back of increased geopolitical fears and the weakening of the USD. The precious metal will remain sensitive to geopolitical factors and the strength of the USD. A flare up in tensions or a continued weakening of the USD will result in further bullishness of the precious metal while a less risky international board with a strengthening USD will see gold soften.