It was a quiet day on the economic event front with only the "employment trends" for April on the economic calendar. That index declined in to the lowest level since May 2021, but was largely ignored by the market.

There were two Fed official speaking. Richmond Fed Pres Barkin and NY Fed Pres. Williams each spoke with Barkin seeming to be a little more cautious on inflation and policy, but both not going so far as to fear the need for a rate hike.

  • Richmond Federal Reserve President Barkin spoke today about his concerns about inflation, and noted disappointment with this year's data and emphasized that the job is not yet complete. Despite confidence in the current restrictive interest rate level's ability to temper demand and bring inflation to target, Barkin stressed the Fed's readiness to respond if the economy overheats. While acknowledging the robustness of demand and the potential for businesses to raise prices, Barkin highlighted the importance of the Fed's deliberate approach in navigating economic uncertainties. He also expressed concern about the lingering risk of inflation and the challenges in controlling it, emphasizing the need to gain confidence in inflation's trajectory towards the 2% target. Additionally, Barkin discussed the normalization of the labor market and the ongoing focus on job growth amidst strong GDP performance. Overall, Barkin's remarks underscore the complexity of managing inflationary pressures and the Fed's cautious stance in addressing them.
  • New York Federal Reserve President Williams and noted a moderation in job growth and emphasized the Fed's comprehensive assessment of economic indicators. Williams, a permanent voting member on the Federal Open Market Committee (FOMC) board, hinted at potential future rate cuts as part of the Fed's strategy. He highlighted the smooth execution of the balance sheet wind-down and its negligible impact on markets, while also noting continued consumer spending and anticipated GDP growth in the 2% to 2.5% range for the year. Despite improving real wages, Williams observed signs of consumer caution in spending and characterized the economy as healthy but experiencing slower growth. Additionally, he suggested that the era of low volatility might be coming to an end, attributing slower inflation retreat partially to the impact of the Russian-Ukrainian war on the global economy. Market expectations currently reflect anticipation of rate cuts, with September pricing in an 84% probability.

There was a number of geopolitical headlines as Isreal invasion of the Rafah seems imminent.

  • Hamas accepted a ceasefire deal proposed by Egypt and Qatar. However, it was later revealed that Hamas agreed to a different proposal than one Israel helped craft. Needless, to say the deal was rejected by Israel.
  • The most recent framework had called for the release of between 20 and 33 hostages over several weeks in exchange for a temporary ceasefire and the release of Palestinian prisoners.
  • Isreal reiterated its commitment to an offensive in the southern Gaza city of Rafah.

Earlier, the Israeli military warned Palestinians living in Rafah to “evacuate immediately.”

Markets were not largely impacted by the news with oil prices moving up modestly in a range of about $1.10 despite the tension.

In the forex market, the GBP was the strongest of major currencies despite the UK being on holiday today. The BOE announces its rate decision on Thursday. The JPY is the weakest of the major currencies the USDJPY (and other JPY pairs) corrected the declines from last week's trading. The USD was up vs the JPY and CHF and modestly lower vs the other currencies.

Forex
The strongest to the weakest of the major currencies

Stocks moved higher extended the gains post the FOMC and from the tamer US jobs report.

  • Dow Industrial Average average rose 0.46%
  • S&P index rose 1.03%
  • NASDAQ index rose 1.19%

In the US debt market, yields were mixed at the end of day with the shorter rent higher and the longer end lower. The U.S. Treasury will auction off 3, 10 and 30 year coupon issues on Tuesday, Wednesday, and Thursday:

  • 2-year yield 4.832%, +2.7 basis points
  • 5-year yield 4.486%, 0.5 basis points
  • 10 year yield 4.487%, -1.3 basis points
  • 30-year yield 4.636%, -2.4 basis points

Oil prices were higher but remained within a fairly narrow up-and-down trading range. The current level shows all trading at $78.62 up $0.51 on the day

Gold prices rose $20.77 or 0.90% at $2322.70, and Bitcoin traded marginally lower and $63,461.