Asian stocks declined and U.S. futures declined on Tuesday as traders mulled geopolitical strains and positioning for the up coming U.S.-China summit meeting. Trasuries, gold and the yen rose.
“It’s always possible the chair could walk back some of the market’s dovish interpretation of last week’s FOMC meeting…but we suspect he will reinforce the message laid out last week,” said Kevin Cummins (NYSE:CMI), a senior U.S. economist at NatWest Markets.
“By the end of July, we believe the Fed will have seen enough to decide that action to counter downside economic risks and low inflation/inflation expectations is warranted, and so we look for a 25 basis point rate cut at the next FOMC meeting.”
USD DXY now looks likely to break through the March low of 95.76 and below there 95.0,” said Tapas Strickland, a markets strategist at NAB.
“The drivers here continue to be heightened expectations of the Fed cutting rates – now 3.1 cuts priced by years’ end,” he said, noting that a number of index trackers showed the data flow from the United States was now showing more disappointing misses than Europe.
Oil prices lost some ground on Tuesday, after rising sharply last week in reaction to tensions between the United States and Iran.