Asian stock markets ended the week on a positive note as the FTSE gained more than 1% at the open. All industry groups kicked-off in the positive territory in London. Energy companies are leading the rally on stocks with WTI consolidating at six-month highs. The fact that $50-a-barrel oil is just around the corner is fuelling the energy stocks. Royal Dutch Shell (LON:RDSa) (+2.00%) and BP (LON:BP) (+1.62%) are among the top performers of the day.
The USD/JPY consolidates above the 110 level as the improved risk sentiment keeps traders in a buy-the-dip trend hinting at further gains toward 110.50/111.00. However, there are talks that the G7 meeting may put some pressure on the Bank of Japan (BoJ) as leaders are known to show no sympathy regarding the BoJ’s monetary policy having a significant impact on the yen's value. Therefore, traders should consider the event risk as G7 financial ministers and central bankers meet in Japan today.
The recent USD rally didn’t prevent foreign central banks from increasing their US debt holdings by $254 million to $3.219 trillion over the week to May 18. The US dollar is softer this Friday as traders try to price in the mixed messages from members of the Fed. New York Fed President William Dudley said there will definitely be a live meeting in June in an effort to keep the possibility of a Fed rate hike alive, although he highlighted the Brexit as a ‘variable in the mix of possibility’ for a June rate hike. The recent hawkishness regarding the Fed seems rather fragile given that there are important caveats to this very doubted Fed rate hike.
Minutes of the ECB's policy meeting in April showed rate setters agreed they needed to defend the bank against a growing number of critics. As the efficiency of monetary measures are increasingly questioned, the dollar strength helped the EUR/USD trade below the 1.12 mark for the first time in three weeks. Trend and momentum indicators suggest there is further downside potential and the 1.10 mark against the US dollar could soon be brought back on the table, if USD-bulls continue to lead the game.