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2017.05.2216:29:00UTC+00Americas Roundup: Dollar Weak As Political Risks Linger; Euro Bounces on Merkel Comments, Oil Rises to Month-High With Output Cut Extension expected may 23rd, 2017

Market Roundup

• US National Activity Index Apr 0.49%, 0.07 previous.

• Iraqi oil minister agrees with Saudi Arabia on extending OPEC cuts for 9 months.

• Fed’s Kaplan calls for reductions in Fed's balance sheet to start later this year.

• Kaplan: three interest-rate hikes in 2017 'appropriate'.

• Kaplan: Fed rate hikes should be gradual, patient.

• Merkel: Euro is "too weak" for Germany due to ECB policy.

• Dijsselbloem: disbursement of next loan tranche to Greece could be decided today.

• RBA's Debelle: Cross-currency basis may not be sign of stress.

• ECB's Weidmann: Don't care about state finances when exiting stimulus.

• UK PM May's election lead falls 14 pts as Labour draws support - ICM.

• Monetary policy adjustments is a trial and error process -China central bank advisor.

Looking Ahead - Economic Data (GMT)

• 00:30 Japan Nikkei Mfg PMI May 52.7 previous

Looking Ahead - Events, Other Releases (GMT)

• 23:00 Federal Reserve Board Governor Lael Brainard gives speech before the first conference of the Opportunity and Inclusive Growth Institute in Minneapolis.

Currency Summaries

EUR/USD is likely to find support at 1.1181 levels and currently trading at 1.1237 levels. The pair has made session high at 1.1262 and hit lows at 1.1226 levels. Euro rose against the dollar on Monday as euro was boosted after German leader Angela Merkel pointed to a weak euro and extremely loose monetary policy as causes of Germany's large trade surplus. The comments played into market speculation that German officials at the European Central Bank may push hard for a tightening of its monetary policy rhetoric and stance this year. U.S. dollar weakened amid political turmoil in the United States reduced expectations of rapid U.S. interest rate rises. The dollar index, which tracks the greenback against a basket of six major rivals, was down 0.2 percent to 97.005. It fell to a low of 96.797, its lowest since Nov. 9, earlier in the session. The euro was up 0.25 percent against the dollar at $1.1232 after hitting a high of $1.1263, earlier in the session.

GBP/USD is supported in the range of 1.2962 levels and currently trading at 1.2995 levels. It reached session high at 1.3041 and dropped to session low at 1.2993 levels. Sterling struggled for direction against the dollar on Monday after a pair of polls over the weekend showing Prime Minister Theresa May's opinion poll lead falling back into single figures ahead of next month's election. Sterling has risen in the past month, in part on the assumption that a May landslide would strengthen her hand over hard-line Brexiteers in her ruling Conservative Party and allow her to negotiate a smoother departure from the European Union. But her perceived weakness on the campaign trail, and a mixed reception for last week's election manifesto, has underwritten a recovery for the opposition labour party. A survation telephone poll published on Monday showed May's lead halving to 9 percentage points, with labour up 5 points and the Conservatives down 5. Sterling was last trading at $1.3002, down 0.25 percent on the day.

USD/CAD is supported at 1.3450 levels and is trading at 1.3509 levels. It has made session high at 1.3533 and lows at 1.3483 levels. The Canadian dollar strengthened against its U.S. counterpart on Monday as prices of oil price remained above $53 a barrel and the greenback continued to weaken against a basket of major currencies. Oil prices rose to their highest levels in more than a month on Monday, amid growing confidence that top exporters would agree to extend supply curbs this week and speculation that the cuts could be deepened further. The greenback weakened as U.S. political turmoil reduced expectations of rapid U.S. interest rate rises. US currency has sunk since President Donald Trump's firing of FBI Director James Comey sparked uproar in Washington and a rise in the odds on betting markets that he would not see out the term begun in January. Investors continue to focus on the problems that have engulfed President Donald Trump's U.S. administration over the last week but there were other familiar and not so familiar issues to deal with too.

USD/JPY is supported around 110.68 levels and currently trading at 111.23 levels. It peaked to hit session high at 111.38 and made session lows at 110.87 levels. The Japanese yen strengthened against the dollar on Monday as an uncertain U.S. political climate continued to weigh on the dollar. The dollar fell more than 2 percent last week, logging its worst performance in over a year, amid growing concerns over U.S. President Donald Trump's recent firing of FBI Director James Comey, who was overseeing an investigation into possible links between the president's team and Russia. Political turmoil in Washington has also raised worries that there could be delays in Trump's efforts to implement his economic stimulus plans and a shortening of the odds on betting markets that he would not see out the term begun in January. Tracking the greenback against a basket of major currencies, the dollar index fell 0.2 percent.

Equities Recap

European share prices steadied on Monday as fresh political concerns in Spain weighed, although merger and acquisition (M&A) activity underpinned broader regional benchmarks.

UK's benchmark FTSE 100 closed up by 0.3 percent, the pan-European FTSEurofirst 300 ended the day down by 0.09 percent, Germany's Dax ended down by 1.9 percent, France’s CAC finished the day flat.

U.S. stocks rose on Monday, boosted by technology shares and by defense companies, which gained after the United States and Saudi Arabia signed a multi-billion dollar arms deal.

Dow Jones closed up by 0.42 percent, S&P 500 ended up by 0.50 percent, Nasdaq finished the day up by 0.81 percent.

Treasuries Recap

 U.S. Treasury yields were marginally higher on Monday as light selling tied to this week's government and corporate bond supply overrode safe-haven bids underpinned by worries about probes into U.S. President Donald Trump's 2016 campaign.

The benchmark 10-year Treasury yield was 2.252 percent, up 0.7 basis point from Friday, while the 30-year yield was 2.914 percent, 0.8 basis point higher.

Commodities Recap

Gold on Monday extended its biggest weekly gain in five weeks as the U.S. dollar fell against the euro, while U.S. political turmoil fueled demand for bullion as a safe-haven and reduced expectations of rapid U.S. interest rate rises.

Spot gold was up 0.5 percent at $1,260.96 an ounce at 3:05 p.m. EDT (1905 GMT), while U.S. gold futures  settled 0.6 percent higher at $1,261.40.

Oil prices rose on Monday as growing confidence that top exporters would agree to extend supply curbs this week and speculation that the cuts could be deepened further pushed prices to their highest levels in more than a month.

Brent futures rose 26 cents, or 0.5 percent, to settle at $53.87 a barrel, while U.S. West Texas Intermediate crude for June rose 40 cents, or 0.8 percent, to settle at $50.73 per barrel on its last day as the front-month.
 

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