While markets are adding to speculations of Fed rate hike in June or July, US equities staged a strong rally overnight led by tech stocks. DJIA closed up 213.12 pts, or 1.22%, at 17706.05. S&P 500 closed up 28.02 pts, or 1.37%, at 2076.06. The developments reversed recent near term bearish signals and turn focuses back to historical highs in the indices. The bullish sentiments carry on in Asian session as Nikkei is trading up 1.8%, Hong HSI up 2.5% at the time of writing. WTI crude oil finally broke out from recent range and surges to as high as 49.35 so far, heading to 50 psychological level. Gold, on the other hand, dips to as low as 1223.4 on dollar strength and risk appetite in stocks. Dollar index is losing some upside momentum after hitting 95.66.
Dollar is turning mixed even though markets continues to add to bet of Fed rate hike in June or July. CME's 30-day Fed funds futures have priced in at 37.5% chance of rate hike in June, and almost 60% chance of rate hike in July. While further rally is expected in the greenback, traders would start to get more cautious into next week. A key factor for FOMC members to consider would be May's job data which will be released next Friday. And the volatility in dollar triggered by next week's non-farm payroll report would likely be the highest in recent years. As for this week, Sterling stays the strongest on receding Brexit fear. Canadian is lifted by rally in oil. Euro and Swiss Franc remain the weakest ones.
Talking about Canadian dollar, BoC rate decision will be the main focus today. The central bank is expected to keep the overnight rate unchanged at 0.50%. Some economists noted that BoC could strike a cautious tone in the accompanying statement. A key reasons for that is the recent set of weak economic data which points to a soft Q2 GDP performance. Also, sentiment indicators also point to softness in manufacturing investments.
Elsewhere, New Zealand trade surplus widened to NZD 292m in April versus expectation of NZD 40m. German Gfk and Ifo will be released in European session. Swiss will release UBS consumption indicator and ZEW expectations. US will release trade balance and house price index.