MORNING MARKET REVIEW

EUR/USD

The EUR/USD pair shows ambiguous trading dynamics, holding near 1.0860. Activity in the market remains quite low, as traders expect new drivers to appear in the market, and many European markets were closed the day before due to holidays. The focus of investors' attention today is statistics from Germany, where the Producer Price Index in April lost 3.3% after –2.9% in the previous month, while analysts expected –3.2%, and in monthly terms the indicator added another 0.2%, which completely coincided with forecasts. In addition, tomorrow at 12:00 (GMT 2) the monthly report from the Bundesbank will be published, and at 10:00 (GMT 2) the President of the European Central Bank (ECB) Christine Lagarde will speak. In addition, minutes of the US Federal Reserve meeting, which took place on April 30–May 1, will be presented on Wednesday. Officials kept the interest rate at 5.50%, and the follow-up statement indicated that the restrictive policy could continue for some time, given the fairly strong inflation risks. However, the situation is gradually changing, and investors are increasingly confident that borrowing costs will be reduced by 25 basis points in September. In total, by the end of 2024, at least two reductions of 25 basis points are expected.

GBP/USD

The GBP/USD pair is trading with upward dynamics, developing an uncertain "bullish" short-term signal, which allowed the instrument to update local highs from March 21. Quotes are again trying to consolidate above 1.2700, while trading participants expect new drivers to emerge. The focus of investors' attention today will be on the speeches of representatives of the US Federal Reserve, who will precede tomorrow's publication of the minutes of the regulator's meeting on May 1. Also, at 19:00 (GMT 2) today, the Governor of the Bank of England, Andrew Bailey, will give a speech, but he is unlikely to provide new information for traders. The main focus of investors' attention this week will be on inflation data in the UK, which will hit the market tomorrow: analysts expect a significant slowdown in the Consumer Price Index in April from 3.2% to 2.1% in annual terms and from 0.6% to 0.2% in monthly terms. The Core CPI is likely to fall from 4.2% to 3.6%. If the forecasts come true, investors will strengthen their expectations regarding a possible interest rate cut by the Bank of England in June. On Thursday, May statistics on business activity from S&P Global will be published in the UK: according to preliminary estimates, the Manufacturing PMI will adjust from 49.1 points to 49.4 points, and the Services PMI from 55.0 points to 54.7 points.

AUD/USD

The AUD/USD pair shows an insignificant decline, developing the "bearish" momentum formed the day before. The instrument is testing 0.6655 for a breakdown, and trading participants are assessing the minutes of the Reserve Bank of Australia (RBA) meeting of May 6-7, published during the morning session, which, as expected, did not reflect any changes in the sentiments of the regulator’s board members. The document states that macroeconomic statistics released to the market from the last meeting indicate a moderate increase in price pressure; however, the current monetary policy remains balanced and allows achieving medium- and long-term inflation goals. Investors also paid attention to Westpac's Consumer Confidence index, which lost 0.3% in May after –2.4% in the previous month. On Thursday, May 23, data on business activity in Australia and the United States will be presented. Analysts expect the Commonwealth Bank's Australian Services PMI to remain at 53.6 points in May, while the Manufacturing PMI will remain at 49.6 points. Forecasts for American indicators also do not imply any changes from previous values: the Manufacturing PMI is expected to reach 50.0 points, and the Services PMI may amount to 51.3 points.

USD/JPY

The USD/JPY pair is showing moderate growth, developing upward momentum in the ultra-short term and returning to the previous local highs of May 1, updated on May 14. Activity in the market remains restrained, as trading participants await the emergence of price movement drivers and are in no hurry to open new positions. Today and tomorrow there will be a number of speeches by representatives of the US Federal Reserve, including John Williams, Christopher Waller and Michael Barr, and on Wednesday the minutes of the meeting of the American regulator on May 1 will be published, at which the interest rate was kept at 5.50%, and officials indicated their readiness to continue restrictive policies to further combat inflation risks. Tomorrow, in Japan, statistics on foreign trade and Machinery Orders will be released to the market. According to forecasts, Exports in April will increase from 7.3% to 11.1%, and Imports from –4.9% to 9.0%. Against this background, the trade balance could show a deficit of –339.5 billion yen after a surplus of 366.5 billion yen a month earlier. Machinery Orders in March are expected to be –2.1% after an increase of 7.7% in the previous month.

XAU/USD

The XAU/USD pair is showing a corrective decline, retreating from record highs around 2450.00, updated the day before. The instrument is testing 2415.00 for a breakdown, while trading participants expect new drivers to appear on the market. Tomorrow, the focus will be on the minutes of the US Federal Reserve meeting, as well as April statistics from the UK on inflation: according to preliminary estimates, the Consumer Price Index will sharply slow down from 3.2% to 2.1%, coming very close to the target levels of the Bank of England. If the forecasts come true, the likelihood of the British regulator cutting interest rates in June will increase significantly. In addition, the Bank of Canada will also publish inflation data, but here analysts expect a reduction only from 2.9% to 2.7%, which is still significantly higher than the regulator’s target. Increased demand for gold is fueled by concerns about rising geopolitical tensions in the Middle East. The situation worsened somewhat after reports of the death of Iranian President Seyed Ebrahim Raisi in a helicopter crash, as the level of uncertainty increased due to a possible change in the country's foreign policy. Also supporting the price of the precious metal is the recovery of economic activity in China, where authorities on Friday, May 17, announced new steps to stabilize the crisis-hit real estate sector. The country is one of the largest importers of gold, and recently the People's Bank of China has been actively increasing its gold and foreign exchange reserves.