The greenback weakened yesterday somewhat as market expectations about a possible rate cut by the Fed seem to increase. Market focus is expected to focus on the Fed’s coming policy meeting, next week, looking for possible signals about the bank’s policy direction. Analysts tend to point out that the market has priced in a rate cut by the Fed to a significant degree yet seems to delay it until end of July. Please bear in mind that a number of Fed officials, not excepting Fed’s Chair Powell, in the recent past had implied that the Fed may be open to some monetary easing. Also note that long term US treasury yields show no signs of the recovery yet, which may also weigh on the USD.

Oil prices drop weaker demand outlook

Oil prices dropped yesterday and during today’s Asian session, as the demand outlook for the commodity seems to weaken. A surprise widening of the US inventories surplus yesterday also did not help oil prices and the official EIA count later today is expected to be closely watched by traders. The slack of the US oil market and rising US stockpiles, despite the OPEC production cuts enhance worries for oil prices according to analysts. On a report released on Tuesday the EIA cut its forecasts for 2019 world oil demand growth and U.S. crude oil production. We expect oil prices to show some increased sensitivity to the EIA inventories release today, yet should there be another indication of a slack in the US oil market we could see oil prices weakening even further.

Other economic highlights, today and early tomorrow

Today during the late European session, we get from Turkey CBRT’s interest rate decision. Polls conducted by Reuters and Anadolu news agencies, show an expectation among the majority of the economists which participated for the bank to maintain its current level and we tend to concur with this view. However, we may see the bank issuing a more dovish statement in order to pave the way for future rate cuts, which could weaken the Lira. In today’s American session, we get the US inflation rates for May as well as the EIA weekly crude oil inventories figure. In tomorrow’s Asian session, we get Australia’s employment data for May. As for today’s speakers, we tend to underscore Mario Draghi’s (ECB President) speech, however do not underestimate RBA’s Ellis, as well as ECB’s De Guidos and Coeure which are also scheduled to speak today.

EUR/USD H4

WTI H4

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