The US dollar is at the highs of the day following a surprise rise in US first quarter wage data. The Q1 employment cost index was up 1.2% compared to 1.2% expected, in a re-acceleration after months of declines.
The data lands as the Fed gets set to begin its two-day meeting in Washington. Market pricing for rate cuts this year fell to 32% basis points from 35.
Earlier today, the WSJ's Nick Timiraos published his Fed preview and it says the Fed will signal it has the stomach to keep rates high for longer. He also wrote this:
But a hawkish pivot, suggesting an increase in rates is more likely than a cut, appears unlikely, for now. Any such shift is likely to unfold over a longer period. It would require some combination of a new, nasty supply shock such as a significant increase in commodity prices; signs that wage growth was reaccelerating; and evidence the public was anticipating higher inflation to continue well into the future.
The US dollar rose broadly on the data with EUR/USD dropping to 1.0690 from 1.0720. Cable also fell about 30 pips while USD/JPY rose to a session high of 157.37 in another sign that it's fundamentals driving the USD/JPY bid.
Risk assets fell on the data with S&P 500 futures now trading 21 points lower.
The data slate for the day will continue with house price data at the top of the hour, followed by the Chicago PMI later and the 10 am ET consumer confident report as the highlight.
