- Powell: Our aim is to have growth moderate
- BOE's Bailey: If we see persistence in inflation, we will have to act more forcefully
- Lagarde: We're unlikely to go back to a period of low inflation
- BOE-nominee Dhingra: There is room for a very-gradual approach
- US Q1 final GDP -1.6% vs -1.5% expected
- EIA weekly crude oil inventories -2762K vs -569K expected
- Germany June preliminary CPI +7.6% vs +8.0% y/y expected
- Bed, Bath and Beyond highlights the ongoing inventory purge as consumer slow
- No policy decisions from OPEC meeting. OPEC+ will meet tomorrow
- Fed's Mester: Have to act more forcefully if inflation expectations become unanchored
Markets:
- Gold down $2 to $1818
- US 10-year yields down 11 bps to 3.09%
- WTI crude oil down $2.24 to $109.48
- S&P 500 down 0.1%
- USD leads, EUR lags
A central banking forum with Powell, Lagarde and Bailey is a must-see event but given that we'd heard plenty from them in the past week, the timing was unfortunate. What seeing them onstage and laying out their stances did was underscore how far ahead the US is. Powell was able to talk openly about hiking enough to curb growth while Lagarde and Bailey had to tread much more carefully.
That said, I think the price action was more about quarter end than anything else. On the fundamental side, the fall in Treasury yields should have weighed on the US dollar. What's more, the revisions to the Q1 GDP report were a surprise and mean inventories will be a larger drag on Q2 and beyond. The consumer was also weaker, something that was backed up by the dismal results and commentary from Bed, Bath & Beyond.
The euro was flat coming into US trade but was steadily sold from there and eventually fell 80 pips. Cable was close behind with both putting up back-to-back days of solid declines.
USD/JPY had a long look at 137.00 but backed off with Treasury yields to 136.55.
The early tone in equities and oil was positive and that offered some initial modest support for CAD but oil reversed midday and the loonie is slated to finish a shade off the worst levels of the day.
AUD and NZD traded in tight ranges new the lows but without and real efforts to test the June lows.
