Dollar advances on upbeat US data - 27.5.2015

US stocks fell on Tuesday as positive economic data spurred investor concerns that the Federal Reserve will raise interest rates sooner rather than later. The S&P 500 closed 1% lower, suffering its biggest drop in three weeks, with all 10 main sectors declining. While orders for durable US goods declined, core capital goods orders rose 1 % in April for a second month in a row, indicating increased business investment. New home sales rose more than expected in April, and house prices advanced 5% year-over-year in March. Consumer confidence also improved, rising to 95.4 in May from 94.3 in April. The dollar advanced, with the ICE US dollar index gaining 1.3% and closing above the 97-level at 97.2700 for the first time in about a month. Today at 12:00 CET Mortgage applications for the week ended May 22 will be released by the Mortgage Bankers’ Associations in US.

European stocks fell on Tuesday as investor confidence was undermined by concerns about financial crisis in Greece and defeat of the ruling conservative party in regional and municipal elections in Spain. The Stoxx Europe 600 lost 0.7%. After earlier comments by Greek officials that Athens had no money for International Monetary Fund debt repayment on June 5, a senior German official said on Tuesday there was no reason to believe Greece would default on the IMF payment. Euro-zone deputy finance ministers will hold a teleconference on Thursday to follow up on negotiations between Greece and its creditors. The creditors believe that Greece should be running a higher primary surplus, or budget surplus before debt servicing costs, in order to repay its public debt. To achieve this they demand that Athens increase the value-added tax and balance pension budget. Greece insists a lower primary surplus would make the economy grow faster, increasing the chances of the creditors getting repaid. The euro retreated to near a one-month low against the dollar. Today finance ministers and central bankers from the Group of Seven industrialized nations will meet in Dresden, Germany, to discuss issues including recent foreign exchange movements, international tax issues, financial sector regulations and reform of quotas at the International Monetary Fund. Today no important economic data are expected in euro-zone.

Nikkei ended 0.2 percent higher today as dollar rose to an eight-year high of 123.33 against the yen. Equities advance on weaker yen as it boosts earnings of export oriented manufacturers. Exporters were strong, with Toyota Motor Corp rising 0.6 percent, Honda Motor Co adding 0.7 percent and Panasonic Corp advancing 0.6 percent. Tomorrow at 0:50 CET a batch of economic indicators including purchases of foreign and domestic bonds and stocks and April Retail Trade will be released in Japan. The tentative outlook is positive.

Oil prices fell on Tuesday, with WTI and Brent crude prices settling at the lowest levels in a week and the month respectively as the dollar rallied. As Morgan Stanley analysts noted, the dollar recovery added to the list of near term factors pressuring the oil market, which includes speculative positioning, growing supply from the Organization of the Petroleum Exporting Countries, risk of Iranian supply, and some signs of stress in physical markets.

Gold prices settled at a more than two-week low as upbeat US economic reports further strengthened the dollar, reducing the demand for the safe haven metal.