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After taking a heavy beating late last week, U.S. stock indices managed to end the day in the green on easing concerns about North Korea.

  • Fed official Dudley: Economic forecasts little changed since start of the year
  • Dudley: U.S. growth still at 2% and enough to tighten labor market
  • Dudley: Inflation to move slightly higher, another hike possible this year

Major Events/Reports

Return of risk appetite?

The recovery during the earlier trading sessions carried on to U.S. markets as traders seemed less jittery about the beef with North Korea. Much of the market attention appears to have been diverted to the goings-on in Charlottesville. However, headlines have also indicated that Kim Jong Un has already been briefed about the missile strike plan on Guam.

As it turned out, the North Korean leader “examined the plan for a long time” before discussing it with military officials. According to the state-run Korean Central News Agency, Kim Jong Un said that he would watch if the U.S. would “make the right decision and show through actions if they wish to ease tensions on the Korean peninsula and prevent a dangerous military clash.”

  • Dow 30 index is up 135.39 points to 21,993.71 (+0.62%)
  • S&P 500 index is up 24.52 points to 2,465.84 (+1.00%)
  • Nasdaq is up 83.68 points to 6,340.23 (+1.34%)

Commodities, on the other hand, continued their rout from the London trading session. In particular, crude oil took hits as NAFTA renegotiations are set to begin.

  • Gold is down to $1,278.10 per troy ounce (-0.26%)
  • Silver is down to $17.034 per troy ounce (-0.51%)
  • WTI crude oil dipped to $47.52 per barrel (-0.15%)

Remarks from Fed official Dudley

Part of the dollar’s gains can also be attributed to New York Fed President Dudley’s relatively optimistic remarks in an interview with the Associated Press.

He said that his U.S. economic forecasts are little changed since the start of the year and that he thinks that inflation could still edge slightly higher. He also mentioned that U.S. growth could stay at 2% and that this pace would be enough to tighten the labor market.

With that, Dudley predicts that another interest rate hike is possible before the end of the year if the economy continues to evolve as expected. He also hinted that an announcement on the balance sheet runoff is due soon.

Major Market Mover(s):

USD

A combination of strong equity market performance and remarks from Fed official Dudley shored up the U.S. currency during the session. Traders also probably grabbed the opportunity to lighten up on their positions ahead of the U.S. retail sales release.

EUR/USD retreated from the 1.1800 area to a low of 1.1769, USD/JPY recovered from a low of 109.42 to 1o9.87, AUD/USD fell back to .7850, and USD/CAD is up to 1.2848.

Watch Out For:

  • 2:30 am GMT: RBA monetary policy meeting minutes
  • 5:30 am GMT: Japanese revised industrial production (no change from initial 1.6% estimate expected)