Dollar strengthens on Fed policy makers’ comments - 26.5.2015

US markets were closed yesterday for the Memorial Day holiday. Dollar continued advancing on Monday after the core inflation in April recorded 0.3 percent rise - the biggest gain in two and a half years, and Fed Chair Janet Yellen said the central bank is on track to raise interest rates some time this year. In an interview in Iceland Fed’s Loretta Mester said accelerating inflation and strong employment growth are pushing the US economy close to the point where it can support higher interest rates. Fed’s Vice Chairman Fischer, speaking on Federal Reserve and world economy in Israel, said the process of returning to a more normal level of interest rates will take a few years and will be determined by data and not by date. Today at 13:30 CET April Durable Goods Orders will be released in US. The tentative outlook is negative. At 14:00 CET March House Price Index by the Federal Housing Finance Agency and the Case-Shiller Composite Index will be published. The tentative outlook is neutral. And at 15:00 CET April New Home Sales, Richmond Fed Manufacturing Index and Conference Board Consumer Confidence Index for May will be released. The tentative outlook is positive. At 15:30 CET Dallas Fed Manufacturing Index for May will be published. Tomorrow at 1:10 CET FOMC member Lacker will speak on financial stability in Louisiana.

European stocks fell in thin trading on Monday as UK and German markets were closed for a holiday. Euro fell after Greek interior minister said Greece will not be able to make a repayment to the International Monetary Fund in June unless the country receives the 7.2 billion euros of aid after an agreement is reached with its creditors. The defeat of the ruling People’s Party in regional and municipal elections in Spain after four years of sharp spending cuts and corruption scandals also weighed on euro. Spain's IBEX fell 2 percent, Greece's ATG index fell 3.1 percent notwithstanding the comment by the Greek government that it intended to make good on its debt obligations but urgently needed aid to be able to do so. France's CAC-40 stock index was down 0.5 percent while Italy's FTSE MIB lost 2.1 percent as Fiat shares fell 3.1 percent after General Motors declined the offer to combine the automakers. No important economic data are expected today in euro-zone. Tomorrow at 7:00 CET June Gfk German Consumer Confidence index will be published. The tentative outlook is negative.

Nikkei fell today as investors took profits after the index gained 4.3 percent over the past seven-day winning streak on strong corporate earnings, optimism for recovering economy and expectations that the Fed will not raise interest rates soon. Tomorrow at 00:50 CET Bank of Japan April 30 meeting minutes will be released in Japan.

Oil prices rose on Monday as high demand in Asia and US outweighed the negative impact of stronger dollar. Customs data indicate Japan’s oil imports rose 9.1 percent year-on-year to 3.62 million-barrels-per day (bpd) in April, and oil demand growth stayed above 8% for a second month in China with imports hitting a record 7.4 million bpd last month. Though US oil prices lost 1.4% last week, the number of oil rigs in the US fell by only one last week and market participants are concerned US shale output could rebound quickly on stronger oil prices.