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The pound was still the rising star of today’s morning London session. However, compared to yesterday’s monster moves, the pound’s star power ain’t as bright.

As for the other currencies, they mostly had mixed and choppy price action. The Aussie and the yen were exceptions, though, since the Aussie was mostly stronger while the yen was broadly in retreat.

  • Euro Zone final HICP y/y: unchanged at 1.5% as expected
  • Euro Zone final core HICP y/y: unchanged at 0.7% as expected
  • Euro Zone trade balance: €19.2B vs. €18.6B expected, €15.7B previous
  • British MPs to vote on backing a snap election later

Major Events/Reports:

Mnuchin interview transcript released – Back on Monday, U.S. Treasury Secretary Steven Mnuchin had an interview with the Financial Times wherein he appeared to be downplaying The Donald’s comment last week that the “dollar is getting too strong.”

Well, the Financial Times released the transcript of its Monday interview with Mnuchin earlier today. And the relevant part where Mnuchin appears to be downplaying The Donald’s comment was when Mnuchin was asked the following question:

“Do you think a strong dollar is good for the US economy? And how should we reconcile your past comments with those of the president?”

And Mnuchin answered as follows (emphasis mine):

“What I’ve talked about is the long-term value of the dollar. And as the world’s currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing. It’s a function of the confidence and the strength of the US economy.”

“So, my comments on the dollar have been focused on the long-term [value] of the dollar. The president’s comments, which again, I agree with, over short periods of time, the strength of the dollar creates certain issues which hurt our exports.”

“And I think that’s what he’s referred to. Which is, again, factually correct . . . We don’t intervene in currency markets. So the strength of the dollar is a little bit like the strength of the stock market. In my mind it’s a function of the confidence in the potential of the US economy and the current state of the US economy, particularly relative to the rest of the world.”

There was also this interesting exchange wherein Mnuchin says that Trump was “absolutely not” trying to talk smack about the Greenback:

FT — You say you don’t intervene in foreign exchange markets, and yet some people in the markets took the president’s comments last week as him talking down . . .

SM — Absolutely not. Absolutely not. I disagree with that completely.

FT — OK. So that’s not part of the strategy? To talk down the dollar?

SM — No. The president was making a factual comment about the strength of the dollar in the short term. And by the way, when we talk about an intervention, and we even noted this in the report, there’s a big difference between talk and action.

The Greenback was mixed during the morning London session. However, the release of the transcript does coincide with the Greenback’s recovery during the earlier Asian session. As such, the transcript was likely the catalyst for the Greenback’s slight recovery for the day.

OPEC meeting set – OPEC is scheduled to have another huddle on May 25. OPEC Secretary General Mohammad Barkindo would not say if OPEC’s oil cut deal would be extended for another six months, but he did say that OPEC members will decide on that day whether or not to extend. Interesting times ahead for oil, huh?

Commodities recover, but precious metals sink lower – After yesterday’s commodities rout, commodities staged a broad-based recovery during today’s morning London session. Interestingly enough, precious metals got left behind.

Base metals got a solid boost.

  • Copper was up by 0.67% to $2.546 per pound
  • Nickel was up by 0.96% to $9,440.00 per dry metric ton

Oil benchmarks were up, but not as much compared to base metals.

  • U.S. crude oil was up by 0.25% to $52.54 per barrel
  • Brent crude oil was up by 0.33% to $55.07 per barrel

Meanwhile, precious metals did the opposite, since they extended their losses.

  • Gold was up down 0.74% to $1,284.50 per troy ounce
  • Silver was down by 0.45% to $18.190 per troy ounce

The U.S. dollar index was up by 0.10% to 99.50 for the day when the session ended, but it was still some distance away from yesterday’s open at 100.24. And market analysts attributed recovering commodity prices to the Greenback’s relative weakness.

Market analysts also noted that the Greenback’s recent slide and optimism over the possibility of an extension to OPEC’s oil cut deal were being partially offset by worries over rising U.S. oil output and inventories.

As for the slide in precious metals, that was probably because of the returning risk-on vibes, which dampened safe-haven demand.

Risk sentiment recovers – The feelings of doom and gloom from yesterday got banished today, since European equity indices were mostly in the green.

  • The pan-European FTSEurofirst 300 was up by 0.34% to 1,483.86
  • Germany’s DAX was already up by 0.23 to 12,028.00
  • The blue-chip Euro Stoxx 50 was up by 0.09% to 3,421.50

U.S. equity futures also got a lift from the upbeat mood.

  • S&P 500 futures were up by 0.26% to 2,343.25
  • Nasdaq futures were up by 0.31% to 5,406.12

Market analysts attributed the recovery in risk sentiment mainly to positive earnings reports. Although basic resources stocks, including mining shares, also bounced back up, so the commodities rally likely helped improve overall sentiment as well.

Major Market Mover(s):

GBP – The pound scored another victory against all its forex peers. Compared to yesterday when the pound easily steamrolled its rivals, however, the pound’s price action was relatively more subdued.

There were no apparent catalysts, but it’s possible that market players are still optimistic that MPs would vote in favor of early elections later, and that a snap election would give more seats to Theresa May’s conservative party, reducing uncertainty in the process.

GBP/USD was up by 25 pips (+0.20%) to 1.2851, GBP/JPY was up by 72 pips (+0.52%) to 140.14, GBP/CAD was up by 56 pips (+0.32%) to 1.7256

JPY – The safe-haven yen was the weakest currency of the session, very likely because of the returning risk-on vibes in Europe.

USD/JPY was up by 33 pips (+0.30%) to 109.04, CHF/JPY was up by 27 pips (+0.25%) to 109.30, EUR/JPY was up by 32 pips (+0.28%) to 116.88

AUD – After getting a beat-down during the earlier Asian session, the Aussie staged a broad-based recovery and even ended up as the second best-performing currency of the session.

Aside from profit-taking by Aussie shorts, it’s possible that the higher-yielding comdoll also got some buyers because of the recovering risk sentiment and higher commodity prices during the session.

AUD/USD was up by 8 pips (+0.10%) to 0.7525, AUD/JPY was up by 34 pips (+0.42%) to 82.05, AUD/CAD was up by 26 pips (+0.26%) to 1.0105

Watch Out For:

  • 2:30 pm GMT: U.S. crude oil inventories (-1.0M expected, -2.2M previous)
  • 5:00 pm GMT: BOC Senior Deputy Governor Carolyn Wilkins will speak
  • 6:00 pm GMT: The FOMC’s “Beige Book” will be released
  • 10:45 pm GMT: New Zealand’s quarterly CPI (0.8% expected, 0.4% previous)