Dollar could see big moves after Trade talks, Fed, Earnings and NFP

US stocks are back in style and riding momentum from fresh queues that the economy is doing well.  Friday’s better than expected US first quarter GDP reading of 3.2% was mainly supported on strong trade and inventory data, but the key takeaway remains the underlying economy is well and is not nearing a recession anytime soon.  The dollar last week rallied strong on the better than expected economic data and robust demand for US equities.

USD – Trade talks and FOMC meeting begins on Tuesday

EUR – Spanish polls see Socialist Majority with Catalan Moderates

Volatility – VIX short bets rise to highest on record

Stocks – Alphabet reports after the close

Oil – Putin: No news that anyone wants to exit production cut agreements

Gold – Needs dovish Fed to stave off sellers 


The dollar could be vulnerable ahead of a big week that includes another round of trade talks and the May 1st FOMC rate decision.  The Fed probably wants this meeting to be a non-event and it could be if they stick to the script.  The US economy is performing better than what most Fed officials thought and they may need to acknowledge the slowdown was temporary.  They may choose to focus on low inflation and the possibility of easing, and that alone would help drive the dollar lower.  If they are much more optimistic on the economy and see an eventual upturn for inflation, we could see the dollar resume on marching higher.  The base case is for the Fed to remain patient on the data and concerned on inflation.  If that is the case, we could see high-beta currencies rally against the greenback.

On Tuesday, Treasury Secretary Mnuchin and US Trade Representative Lighthizer return to Beijing for another round of talks that will focus on intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, purchases and enforcement. President Xi delivered many assurances with his speech at the Belt and Road Forum in Beijing. If President Trump signals to his team he is content with the latest concessions, we could see a final meeting setup later in May.


Euro opened slightly positive in early Asia-Pacific trade after Spain’s incumbent Prime Minister Pedro Sanchez appeared set to win the general election and could form a government with Catalan support.  This election appears to be positive for the euro and for stability for Spain’s economy.  The euro also received some support from S&P’s decision to keep Italy’s sovereign rating at BBB, which is just two notches in investment grade territory.   They did keep the outlook at negative, but that was expected.  Italy should see some relief in the bond market on Monday.


Volatility has been nowhere to find for many FX traders and hedge funds seem to believe that trend is not going to change anytime soon.  The latest CFTC numbers show big bets were short the VIX by about 178,000 future contracts, the largest amount since they kept records in 2004.  While the VIX posted a gain last week, it remains in a downward trend and is currently 30% lower than the average over the last 20 years.  Short VIX bets could be ripe for a short squeeze here, but the overall macro drivers do appear poised to support the downward move.


Google parent company Alphabet Inc. reports after the close. Expectations are for earnings per share to fall after taking a $1.7 billion antitrust fine from the EU. Revenues are expected to remain strong with a slightly over 21% annual gain to over $30 billion. Results from Facebook lead many analysts to believe Google should see strong mobile ads.  Strong results from Google could help keep the Nasdaq delivering fresh record highs.


Crude prices had their first major weekly decline in months as it appears momentum from the OPEC + production cuts and ending of sanction waivers on Iranian crude have run out of steam.  Oil was ripe for a pullback and West Texas Intermediate crude may find strong support from the $60 a barrel level.

Over the week, Russian President Putin told reporters in Beijing, ““We have agreements within the OPEC+. We fulfill our agreements and we don’t have any news, any information, from our Saudi partners and any other OPEC member, that they are ready to exit these agreements.”.  Markets are focused on whether or not China remains critical of the US decision on ending of waivers on purchasing Iranian crude.  Putin took the opportunity to say Russia would be willing to meet China’s oil demand needs.  Which would imply the Russians are eager to ramp up production.

Russia appears to have every reason to resume ramping up production levels and the base case should start to become we will not see OPEC + agree upon extending production cuts with tweaks to cover the shortfall from Iran.  If we do see an agreement, it would be surprising if we did see the Russians deliver 100% compliance.  The Russian President did not deliver any updates on the contaminated oil in the Druzhba pipeline to Europe.

Oil remains very vulnerable here, but we could see some range trading here until Wednesday’s Fed meeting.  If we do see the Fed become more concern with low inflation and hint that we could see an insurance rate cut, that could provide a major dollar reversal, which should help propel risk assets and stabilize any weakness we see with crude early in the week.

Crude prices are slowly losing some of the key catalysts from this major rally and if we see the velocity in rising US production heat up, sellers may become in control in the short-term.

The alleviation of global growth concerns will likely see a pickup in demand for oil, while the supply side argument will likely become bearish in the coming months.  If we see a major dollar reversal, that should help oil prices become supported on any major selloffs.


The precious metal did not break last week despite major dollar strength in the first half of the week.  The big event for this week could be the Fed’s rate decision on Wednesday.  If they signal that we could see a rate cut later in the year, that could be the key catalyst for gold to regain bullish momentum.

The Fed is likely to wait until after the summer if they were to signal a rate cut, but if they are overly concerned with tame inflation, they could tee up a cut sooner for the end of the year.


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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.