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Forex outlook:
The dollar was mostly flat on Monday in a quiet session, but expectations the Federal Reserve will keep interest rates unchanged this year even as other central banks tighten monetary policy kept sentiment negative. The dollar is trading around the levels of 1.3620 against the Euro, around the levels of 123.40 against the Yen and around the levels of 2.0150 against the sterling.
High oil prices and steady growth are expected to keep the European Central Bank on a tightening path, although the Bank of Japan will likely lag all other Group of Seven central banks bar the Fed, even if it does hike rates from 0.5 percent some time this year. "The dollar remains biased to the downside as a result of the outlook that U.S. interest rates will remain steady for the remainder of this year, which contrasts with rate hike expectations in Canada, the euro zone, UK and Japan," said Omer Esiner, foreign exchange market analyst with Ruesch International in Washington.
"We're continuing to consolidate here. As long as the euro stays above $1.36 and sterling above $2.01, that should bode well for a push higher. We'll probably test the highs in the Euro this week above $1.3680," said Jake Lee, foreign exchange dealer at Union Bank of California in Los Angeles.
The U.S. dollar's sluggishness was most apparent against the Canadian dollar, which hit a 30-year peak against the greenback around C$1.0445 on widespread expectations the Bank of Canada will raise rates a quarter points to 4.5 percent on Tuesday.
Because there is hardly any U.S. economic data this week, the Bank of Canada decision and statement could take on more significance for currency markets than it otherwise might. "Incoming (Canadian) data have recently strengthened the case for tightening," said CitiFX in its latest research note. "Both headline and core inflation remain above target, labor markets are firm and the fundamentals appear to be in place for faster expansion, against a backdrop of elevated commodity prices," the bank added.
Gold: US. Gold and silver rose in New York on speculation a decline in the value of the dollar will boost demand for precious metals as alternative investments. Gold generally moves in the opposite direction of the U.S. dollar, which has fallen 1.7 percent in the past three weeks against a basket of six major currencies. Gold is up 3.8 percent this year while the dollar index has fallen 2.6 percent. “The dollar is trending down and that's why gold is looking good,'' said Walter Otstott, senior broker at Dallas Commodity Co. in Dallas. Gold future contract is trading around the levels of 663.0$ per once.
Crude Oil: U.S. crude oil futures fell on Monday, dropping after earlier meeting resistance at a 10-month high of $73 per barrel as Midwest refinery snags were expected to limit crude oil demand and swell storage at the NYMEX delivery point in Cushing, Oklahoma. “BP Whiting is the big story today,'' said Tom Bentz, a broker at BNP Paribas in New York. “It's another large refinery with problems in the Midwest. Demand for sweet oil in the middle of the country will fall and this pulling crude lower''. Crude Oil future contract is trading around the levels of 72.10$ per barrel.
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