Headlines:
- ECB's Lagarde: We need to continue with rate hikes
- ECB's Rehn: Core inflation must slow before mulling easing
- ECB's Kazaks: It is hard to say where interest rates will peak
- ECB's de Guindos: Recent inflation data are positive but still far from target
- ECB accounts: A number of members initially expressed preference for 50 bps rate hike
- Eurozone May preliminary CPI +6.1% vs +6.3% y/y expected
- Eurozone May final manufacturing PMI 44.8 vs 44.6 prelim
- Eurozone April unemployment rate 6.5% vs 6.5% expected
- Germany April retail sales +0.8% vs +1.0% m/m expected
- UK May final manufacturing PMI 47.1 vs 46.9 prelim
- UK April mortgage approvals 48.69k vs 53.00k expected
- UK May Nationwide house prices -0.1% vs +0.1% m/m expected
- Switzerland April trade balance CHF 2.60 billion vs CHF 4.53 billion prior
- US May Challenger layoffs 80.09k vs 66.99k prior
- OPEC+ not likely to deepen supply cuts at 4 June meeting - sources
Markets:
- AUD leads, JPY lags on the day
- European equities higher; S&P 500 futures up 0.2%
- US 10-year yields up 1.9 bps to 3.656%
- Gold up 0.3% to $1,967.55
- WTI crude down 0.5% to $67.74
- Bitcoin down 0.8% to $26,894
There was plenty of data to scour through during the session but the most notable one is that euro area inflation is perhaps starting to show signs of slowing down. Both the headline and core annual inflation eased in May, providing a welcome relief to the ECB and for the economic outlook.
ECB policymakers were also quick to provide a couple of timely messages and a reminder to markets, that their job is not done yet despite the more optimistic data this week.
The euro was little changed on the news though, as a lot of this has been predicated by the individual country readings earlier this week.
Instead, it was more the case of the dollar faltering after a brighter start to the session. The greenback advanced early on but gave up gains and turned lower in European trading today.
EUR/USD fell to 1.0665 earlier but has clawed its way back up above 1.0700, with large option expiries also perhaps playing a role on the day. GBP/USD also dipped towards 1.2400 but has seen quite a modest turnaround to 1.2480 as buyers look to try and test the 1.2500 mark again.
Then, we saw USD/JPY rose to 139.95 during the tail end of Asia trading as higher bond yields helped to underpin the pair. However, as the dollar reversed, so did the upside momentum as the pair is seen falling back to 139.45 at the moment.
The antipodeans are arguably the ones that are finding the most relief from the dollar U-turn today, with AUD/USD having briefly fallen to 0.6485 before coming back up to 0.6520 levels now. Meanwhile, NZD/USD also tested waters below 0.6000 before coming back up to 0.6020 currently. Both pairs are seen holding the line at key support at 0.6500 and 0.6000 respectively.
It's now over to US ADP data to see where that leads us next and how that will impact expectations ahead of the main event tomorrow.