United States stocks extend rally after more dovish Fed tilt

Powell Poloz

Shares also were boosted by the Australian central bank's decision on Tuesday to trim its benchmark interest rate by a quarter of a percentage point in the first such cut in almost three years. Global stock markets shed over $2 trillion in value in May. The U.S. -China trade war has a cast a dark cloud over global GDP.

On the flip side, the 1.1210-1.1200 region (50-day SMA) now becomes immediate support to defend, which if broken might turn the pair vulnerable to slide back towards testing the 1.1135-30 intermediate support before eventually falling to challenge the 1.1100 round figure mark. "So obviously a rate cut would provide liquidity into the economy and the marketplace, and that's what investors are looking at right now".

"Given the extent of the dovish re-pricing of the Fed outlook and the collapse in US treasury yields in recent weeks, the dollar losses appear fairly muted in this context", said Chris Turner, head of FX strategy at ING in London.

Additionally, some districts said the trade uncertainty had already taken a toll on local investment and employment. The possibility that the USA and Mexico may begin a series of tit-for-tat tariffs only adds to economic woes.

Investors added to bets that the Fed would have to lower borrowing costs multiple times by year-end on Wednesday after a report by a payrolls processor showed private employers added 27,000 jobs in May, well below economists' expectations and the smallest monthly gain in more than nine years.

Manufacturing shrinks as Brexit stockpiling halts
Expectations are for the measure to inch up to 50.6 from 50.4 in April and above the three-year low of 48.9 registered in March. There were however widespread reports that Brexit uncertainty had held back client demand and remained a headwind to growth.

The Fed has held its benchmark rate in the range between 2.25% and 2.5% this year, with Trump advocating for lower rates as he continues to chase tariffs.

But the biggest lift for regional markets came from Fed Chairman Jerome Powell's comment that the central bank was "closely monitoring" trade developments and would "act as appropriate" to sustain the US economic expansion.

Global trade growth is projected to be the weakest in 2019 since the financial crisis a decade ago. Morgan Stanley said that a recession would likely start within nine months if the Trump administration moves forward on raising tariffs on the remaining $300 billion of Chinese imports.

"Weak sentiment around the breakdown in U.S". "The U.S. economy, generally, is in the midst of a very lengthy expansion, the U.S. consumer remains confident, but trade policy is definitely a downside risk". The Canadian trade deficit is expected to narrow modestly due to higher oil prices in April.However, the result should not have any impact on the Canadian dollar. For now, the bears are winning out. US private employers hired at the slowest pace in more than nine years in May, weakness that analysts blamed on the heightening global trade tensions. Crude inventories jumped by a surprise 6.8 million barrels in the last week of May, while gasoline inventories also rose by 3.2 million barrels.

The precious metal is on pace for a sixth consecutive gain, which would be the longest win streak since an 11-day rally ended January 5, 2018.

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