There were no major U.S. economic releases on Monday, but several Fed members were back on the speakers’ circuit after last week’s Federal Open Market Committee meeting. If you recall, the central bank raised its benchmark interest rate 25-basis points and stuck with its forecast for three rate hikes in 2018.
New York Federal Reserve President William Dudley said on Monday that bank regulators should increase their focus on bank executives. Dudley said that banks should adopt compensation plans that discourage excessive risk-taking and place greater onus on senior managers for wrongdoing.
Dudley said regulators should encourage banks to overhaul their corporate cultures to reduce risk and bad behavior, even as regulators move to relax other rules introduced following the 2007-2009 financial crisis.
Cleveland Fed President Loretta Mester, who leans somewhat hawkish, said the central bank can speed or slow its “gradual” policy tightening if, for example, recently announced U.S. tariffs on imports lead to a trade war that hits the economy.
Mester also said the Federal Reserve should continue raising interest rates this year and next so that it can avoid an overheating that cuts short the economic expansion that is already picking up steam.
Fed member Randal Quarles, the central bank’s head of regulation and supervision said on Monday the Federal Reserve may change decades-old rules that require banks to lend to low-income borrowers as part of a broader effort to revise a range of banking regulations.
U.S. Dollar
The U.S. Dollar fell to a five-week low against a basket of major currencies on Monday, driven by optimism that negotiations between the United States and China could ease fears of a trade war. Improved appetite for risk also helped pressure the Greenback.
China’s premier, Li Keqiang said on Monday China and the United States should maintain negotiations and he reiterated pledges to ease access for American businesses, as China moved to avert a trade war.
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Gold
Gold futures finished higher on Monday, hitting a five-week high in reaction to a weaker U.S. Dollar. Gains were likely limited by an easing of global trade tensions and rising U.S. interest rates.
Gold rallied initially but broke sharply after the United States and South Korea agreed to revise a trade pact criticized by U.S. President Donald Trump, Seoul said, with U.S. automakers winning improved market access and Korean steelmakers hit with quotas but avoiding hefty tariffs.
Crude Oil
U.S. West Texas Intermediate and international-benchmark Brent crude oil closed lower on Monday as investors took profits after last week’s more than 5 percent rise. Traders said that despite the strength in the stock market, there was still some uncertainty over how a trade war would impact demand for crude oil.