Markets Muted Ahead of FOMC Minutes: Morning Market Update May 20

May 20th, 2015 by

Markets are assuming the usual holding pattern ahead of the release of the Federal Reserves Open Market Committee meeting minutes scheduled for 2pm Eastern time today.

Gold is just above unchanged, while the various white metals gain modestly this morning. At 10 am, spot gold was up $3.40 to $1.211.40, while silver had gained 14 cents to $17.22. The platinum group metals (PGMs) have also seen slight gains.

The dollar is up slightly this morning, retaining a modest pressure on gold after two days of solid gains for the greenback. European stocks are down, and Wall St. has opened lower.  Crude oil is rebounding a bit after recent losses, up around 1% in early trading.

Yesterday in the Markets

tearing-euroThe big economic news yesterday was the announcement by the European Central Bank that it would speed up quantitative easing for the next two months. This sent the euro to its worst daily losses in weeks, and boosted European stocks.

The U.S. dollar was a big beneficiary of the drop in the euro, rising over 1% for a second day to close at 95.25 on the DXY dollar index. The dollar got a second, smaller boost when housing starts for April were reported to have grown more than expected.

Despite the news of accelerated money printing out of Brussels, U.S. stocks could not make gains. Starting with another volatile morning of trading, they traded in a tight range to dip in the last hour before the close. The DJIA was the only index to finish in the positive (barely.)

Gold was hit by the surge in the dollar and the housing starts report, to drop near $1,208 an ounce. It built a floor around this mark through the rest of the day, closing down 1.45% at $1,208 even. Silver dropped 61 cents to close at $17.07, while platinum shedded $27 and palladium was down $12.

Crude oil dropped on the dollar’s advance, with West Texas Intermediate losing 3.5%, and Brent down 2.8%

In yet another chapter of the Greek debt crisis, the Athens government submitted a budget plan to alter the terms of the existing bailout, which was promptly rejected by the nation’s creditors.

Factors Affecting Gold Today

500px-US-FederalReserveBoard-Seal.svgThe big news today will be the release of the FOMC minutes, which may give an insight into the inner thoughts of the Fed regarding when to finally hike interest rates above zero (or it may confuse everyone again.)

moneymanThe “too big to fail” banks are once again getting hit by regulators over manipulation of the LIBOR benchmark interest rate. Part of the original settlement was for the banks to stop manipulating the market. They ignored this, “violating parole” by manipulating currency rates for their own gain and their clients’ loss. Citicorp, JPMorgan Chase & Co., Barclays Plc and Royal Bank of Scotland Plc agreed to plead guilty to conspiring to manipulate the price of U.S. dollars and euros. Citi was fined $925 million, Barclays paid $650 million, JP Morgan was hit for $550 million, and RBS was fined $395 million in this latest round of financial corruption.

Giant Swiss bank UBS was fined by the U.S. Justice Department for a symbolic $342 million for manipulating the dollar/euro exchange rate, in return for rolling over on the other mega-banks and providing evidence to the Feds. Because they violated the previous LIBOR settlement, however, they have had to plead guilty to one count of wire fraud and pay an additional $202 million.

Considering the trillions made from manipulating the markets, the TBTF banks probably just count these fines as a business expense.

The Wall Street Journal has a nifty illustration of how interconnected the corruption in LIBOR rates was/is.

 

looking-aheadLooking Ahead

Tomorrow’s docket includes a producer prices from Germany, France, and the EU as a whole; the minutes of the latest ECB meeting; retail sales out of the UK; and first-time jobless claims, flash producer prices, and consumer confidence reports from the U.S.

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