Oil prices dropping to 15-month lows
New York Fed President William Dudley reinforced expectations of another interest rate hike this year stating that inflation should rebound alongside wages as the labor market continues to improve.
Dallas Fed President Robert Kaplan on the other hand, said that low US treasury yields suggest markets expect sluggish growth ahead and there needs to be more evidence that recent weak inflation is indeed transitory.
The USD dollar traded in a relatively tight range only jumping up to a high of 97.87 after Fed Dudley’s comments.
The index then inched lower throughout the week as more promising data was released in Europe. Markets will be waiting for fresh new indicators to provide more insight on the Fed’s plans.
In commodities, oil prices dropped to around multi-month lows this week despite strong compliance by OPEC and non-OPEC’s deal to curb production. OPEC compliance with the output curbs in May was 108%, while non-OPEC compliance was 100%. However, the drop in prices suggests that markets are unconvinced that the production curb will affect total supply as other producers like US shale have been ramping up production. Brent Crude was last $45.65 while West Texas was $43.15.
New and existing home sales rebounded in May despite rising prices due to low supply. Low mortgage rates, a solid labor market, and rising wages continue to drive steady demand for housing. However, a tightening inventory could lead to inflated prices that could potentially price out new home buyers. Last month’s median sale price came in at $252,800 up 5.8% from a year ago and marked a record high for the survey.