Markets Mixed On Trade & Monetary Policy Narrative

After a quiet start to the week, the markets were treated to two major themes on Tuesday.

Equities posted some gains after reports that President Trump will be meeting with Chinese Premier Xi on the sidelines of the G-20 summit. There is no official schedule for the meeting as of yet. Still, this gives hope to the possibility of the US and China agreeing to a trade deal.

Meanwhile, after the RBA minutes showed further rate cuts in store, it was the turn of ECB President Mario Draghi. Speaking an ECB event in Sintra, Draghi announced the possibility to cut rates even further.

Investors will be looking to the FOMC meeting which concludes today with economic projections, a dot plot plan and press conference from Fed Chair Jerome Powell.

Euro Drops as Draghi Turns Dovish

The euro fell sharply on Tuesday. ECB President Draghi announced fresh stimulus and a possible rate cut, as early as July. Draghi said that some of the measures that the ECB could take include extending the time frame for the next rate hike and even cutting the ECB rates. The comments came during Draghi’s speech at the ECB conference in Sintra, Portugal.

Will the EUR/USD Drop Further?

After the failure to hold on to the support at 1.1200, the single currency broke past this level, falling to a two-week low. Price action could remain somewhat volatile ahead of today’s Fed meeting. With the markets already discounting a dovish Fed, the element of surprise could dictate the flows into the USD. EUR/USD’s next main support is seen at 1.1150 to the downside.

eurusd

Oil Rebounds on Oil Minister’s Comments

Crude oil prices got a reprieve as the commodity logged gains on Tuesday. WTI crude oil prices rose over 4.0% on the day on Tuesday. In an interview, an oil minister from Equatorial Guinea said that OPEC members prefer prices to be around $60 – $70. The comments come ahead of the semi-annual OPEC meeting which could be scheduled in July. The prevailing narrative is that OPEC will continue with its production cuts.

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