• FOMC leans in
  • France heads for the final showdown
  • Trouble in commodities
  • Taking another swing at healthcare

The dollar jumped yesterday afternoon after the FOMC minutes confirmed that the Fed is holding fast to a June rate hike. By discounting softer data in the first three months of the year as ‘transitory’, the Fed is allowing investors to look past the concerns that a weak Q1 has raised. The committee is united in this view; not one member dissented the updates to their policy statement. While this confirms a more hawkish tilt for the Fed, the dollar failed to sustain the move higher. With no change in the language surrounding plans to shrink the balance sheet, the FOMC reiterated their commitment to reduce the this language unchanged was a purposeful move, the Fed has emphasized that the balance sheet will not be used as an active tool of monetary policy. While this did disappoint some investors who were expecting further guidance on timing for a balance sheet reduction, they may get what their looking for when the full minutes are released May 24th.

16.5 million people tuned in to watch the final debate between the two contenders for the French presidency last night. The debate turned into an all-out mudslinging contest between Marine Le Pen and Emmanuel Macron. Rather than discuss the details of their respective policies, the two volleyed insults at one another. Macron labelling the far-right Le Pen as a dangerously nationalistic, ignorant, “hate-filled” liar; Le Pen calling Macron spoiled, arrogant, and putting the interests of big finance over those of the French people. A snap poll showed that Macron was the more believable of the two, further securing his place as the frontrunner for Sunday’s vote.

Commodities are giving us a run for our money this morning. Oil fell to a five-month low, trading just below $47 a barrel as investors worry that global supply will continue to expand. OPEC certainly has their work cut out for them if they want to convince the markets that their supply cuts can meaningfully impact supply or excess inventories as the US increases production. Elsewhere in the commodities space, iron ore is caving once again after reports that Chinese imports declined in April. The fall in Australia’s biggest export triggered another move down for Aussie dollar, extending losses against the greenback for a third straight day.

The House GOP is having another go at healthcare reform today. Republicans need to rally support from both conservatives and moderates within the party to pass the vote, something they failed to do at the end of March, forcing Speaker Paul Ryan to rescind the bill to replace Obamacare. Even if this vote passes through the House, there are major hurdles ahead in the senate before it can pass the President’s desk. Thus, even if we see the bill pass a vote today, we may not see much optimism for the USD given the overall picture.

EURUSD: Euro supported with Emmanuel Macron’s perceived victory at last night’s prickly debate with Marine Le Pen.

GBPUSD: UK service sector growth hit a 4-month high in April, pushing sterling to daily highs and erasing much of yesterday’s losses against the greenback.

AUDUSD: Aussie dollar, hit by a smaller than expected trade balance and yet another drop in the price of iron ore.

USDCAD: CAD slightly weaker after oil prices hit a five-month low this morning.

USDJPY: The yen continues to weaken against the greenback as political risk in France abates.