Summary:
European stock indexes edged lower on Monday and euro zone bond yields dropped, but news that the U.S. had reached a debt ceiling deal over the weekend kept Wall Street futures positive.
European stock indexes edged lower on Monday and euro zone bond yields dropped, but news that the U.S. had reached a debt ceiling deal over the weekend kept Wall Street futures positive.
The dollar nudged down, pulling back from six-month peaks against the yen. Oil prices slipped 1% and gold was little changed, hovering near Friday’s two-month low.
U.S. President Joe Biden and top congressional Republican Kevin McCarthy reached a tentative debt ceiling deal on Saturday, aiming to stop the U.S. from defaulting on its debt.
The deal is expected to provide only short-term relief for markets, as worries linger about inflation and further rate increases.
Commodities
Markets weighed a tentative U.S. debt ceiling deal that would avert a default by the world's top oil consumer against further Federal Reserve interest rate hikes that could curb energy demand.
‘Traders have been left a little confused as to what we can expect,’ said Craig Erlam, senior markets analyst at OANDA.
‘It may be that Saudi Arabia wants to keep traders on their toes, but to make these comments and not follow through could be perceived as weak and see prices drift lower again,’ Erlam said.
Forex
Markets are now pricing in a roughly 50-50 chance that the Fed raises rates by another 25 basis points at its June 13-14 meeting, up from the 8.3% chance predicted a month ago, according to CME's FedWatch Tool.
The dollar was on course for a monthly gain of about 3% against the yen. The dollar index has gained 2.5% in May. Upbeat world sentiment pushed the risk-sensitive Australian and New Zealand dollars off last week's six-month lows.
The yen, trading above 143 per dollar Thursday, may spark US-Japan talks, but Tokyo is expected to resist calls to strengthen its currency.
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