Headlines:
- We have the votes to pass the debt limit bill today - McHenry
- Fed's Mester: No compelling reason to wait on rate hikes
- ECB's de Guindos: Inflation data today and yesterday has been positive
- ECB's Villeroy: It is quite likely that inflation has passed its peak in France
- Traders pare ECB rate hike bets after French inflation data
- France May preliminary CPI +5.1% vs +5.5% y/y expected
- Saxony May CPI +6.5% vs +7.6% y/y prior
- Bavaria May CPI +6.1% vs +7.2% y/y prior
- North Rhine Westphalia May CPI +5.7% vs +6.8% y/y prior
- Italy May preliminary CPI +7.6% vs +7.4% y/y expected
- Germany April import price index -1.7% vs -0.5% m/m expected
- Germany May unemployment change 9k vs 15k expected
- France Q1 final GDP +0.2% vs +0.2% q/q prelim
- Italy Q1 final GDP +0.6% vs +0.5% q/q prelim
- US MBA mortgage applications w.e. 26 May -3.7% vs -4.6% prior
Markets:
- USD and JPY lead, AUD lags on the day
- European equities lower; S&P 500 futures down 0.4%
- US 10-year yields down 5 bps to 3.646%
- Gold flat at $1,959.58
- WTI crude down 2.6% to $67.67
- Bitcoin down 2.4% to $27,121
It was an eventful session as there were a couple of broad market themes playing out in European trading today.
For one, the dollar resumed its bid from last week as it advanced across the board despite falling yields once again (it was the opposite yesterday). Poor China data from Asia trading earlier sort of set the tone for a more risk-off mood in Europe and that was certainly the case with the greenback gaining ground alongside the yen.
Equities fell as such and even with lower inflation figures in France, Italy, and German states, it wasn't enough to turn the tide.
Instead, it was a typical flight to safety with commodity currencies and oil being offered. Despite a stronger dollar, gold held its ground as it seems like haven bids are helping out.
Going back to FX, EUR/USD declined from 1.0710 to 1.0660 before holding around 1.0680 now. Meanwhile, GBP/USD also fell from 1.2390 to 1.2350 with USD/CHF even moving up by 0.5% to clip the 0.9100 level on the day.
But it was against the commodity currencies where the dollar did most of its work, with AUD/USD down 0.6% to 0.6475 and NZD/USD down 0.6% as well to test the 0.6000 mark. Both pairs are down to their lowest levels for the year, threatening a further downside break.
WTI crude is keeping down by nearly 3% on the day as China's worries weigh on demand prospects, testing waters below $68.
Month-end trading is also in focus, so just keep an eye out ahead of the London fix later in case we do get another injection of volatility.
