US futures jump as Fed’s Bullard pointed to a rate cut
The Australian dollar rose today after the RBA delivered its interest rates decision. As expected, the bank lowered interest rates by 25 basis points. In response, the major banks in the country like ANZ announced a rate cut. The Aussie rose because the rate cut was already priced-in and because the 25 basis points cut was lower than the 50 points that some market participants were waiting for. In the statement, the bank said that the rate cut will help improve the country’s employment while keeping inflation in check. Earlier on, data showed that retail sales slumped by -0.1% in April. Tomorrow, the statistics office will release the final reading of the Q1 GDP numbers.
The euro rose after the better-than-expected unemployment rate data from the region. The unemployment rate declined to 7.6% from the previous 7.7%. Investors were expecting it to remain unchanged. However, the EU is a big place and the overall data does not show what is happening. For example, recent data showed that the unemployment rate in Germany was at 3.1% while that of Italy was at 10.3%. Meanwhile, in May, the headline CPI data rose by 1.2%, which was worse than the expected 1.3%. In April, the CPI had jumped by 1.7%. The core CPI, which strips out the volatile food and energy products, declined to 0.8% from the previous 1.3%.
Today, US futures pointed to a higher open after the Fed’s James Bullard said that the Fed was likely to lower rates this year. He said that this will depend on whether the trade war will continue. If it does lower rates, it will be received well by Donald Trump, who has been calling for a rate cut for months. The markets also jumped after it emerged that Republicans in the Senate were considering a vote to block Trump’s new tariffs on Mexican goods. Before the vote, they aim to persuade Trump to abandon the tariffs and instead engage with Mexico on how to tame illegal immigration. Later today, investors will listen to the Fed’s Jerome Powell, who will deliver a speech at the Conference on Monetary Policy Strategy, Tools, and Communication Practices at the Chicago Fed.
After days of gains, the EUR/USD pair crossed the important resistance level of 1.1265. On the four-hour chart, the pair found significant resistance at this level. It is above the 50-day and 25-day moving averages while the money flow index has moved above the overbought level. The MFI is similar to the RSI, with the difference being that it factors in the volumes. The price is also above the Envelopes indicator. There is a likelihood that the pair will remain along these levels ahead of the ADP jobs numbers tomorrow.
The AUD/USD pair rose to a high of 0.6993. This was a continuation of a major rally that started on May 23 when the pair traded at 0.6865. On the hourly chart, the pair is along the upper line of the Bollinger Bands. It is also above the 50-day and 25-day moving averages while the signal line of the Relative Vigor Index (RVI) is slightly above the neutral line. While the pair could continue moving higher, there is a likelihood that it could have a pullback.
The XAU/USD pair paused the sharp rally that has been going on since Friday. The pair reached a high of 1329, which was slightly higher than the open of 1325. On the six-hour chart, the price is above all the short and medium moving averages. The RSI remains above the overbought level of 70 but has flattened at the 83 level. The signal line of the RVI is crossing the RVI line. This is an indication that the pair could have a slight pullback.