As the North American session begins, the CHF is the strongest and the USD is the weakest.
The USD fall comes despite the Fed members now signaling delays in rate hikes. Overnight, Minneapolis Fed President Neel Kashkari stated in an interview with CNBC Europe that there is no urgency to cut interest rates, noting that inflation has been stable recently. He emphasized the need to wait and see to gain more confidence in the price outlook. Kashkari highlighted that the Fed is in a favorable position due to the robust labor market and advised not to rule out any options regarding the future policy path.
Feds Bowman and Mester are on the road and commented from a speaking engagement in Tokyo. Their comments focused on the nuances of monetary policy and communication, rather than current policy settings. Fed's Mester will be retiring in June. As a result, I would expect that her comments now and going forward will not likely be policy related. Bowman, however, remains a permanent voting member as a Governor of the Fed.
Fed Governor Bowman remarked that the Fed admitted mistakes by saying that they would have benefited from deciding to taper and end quantitative easing (QE) earlier in 2021. This could have facilitated earlier rate hikes. She suggested that in the future, the Fed should clearly signal that QE is temporary and should be unwound once market conditions normalize.
Cleveland Fed President Loretta Mester emphasized the need for the Federal Open Market Committee (FOMC) statements to provide a more detailed economic assessment. Mester believes that such detailed communication should explain how the economic assessment influences the outlook and the associated risks. Interesting comments from both but certainly not market moving.
In Europe, the June 6 ECB meeting is quickly approaching and ECB policymaker Mario Centeno stated today that the process of reducing interest rates is about to begin, indicating confidence that inflation is under control. This reaffirms the expectation of a rate cut at the upcoming meeting echoed by numerous ECB members.
On Monday,
- ECB policymaker Francois Villeroy de Galhau stated that a rate cut in June is almost certain, barring any unexpected developments.
- ECB policymaker Olli Rehn remarked that the conditions are favorable for initiating rate cuts in June. He pointed out that inflation is steadily converging toward the 2% target, making it an appropriate time to ease monetary policy.
- ECB Chief Economist Philip Lane, in remarks to the Financial Times, indicated that there is enough evidence to consider interest rate cuts, though caution is necessary. Lane expects inflation to remain around current levels in the coming months but acknowledges the risk of easing policy too quickly. If inflation proves persistent, premature easing could hinder the goal of sustainably returning inflation to target levels.
The market - going forward - will focus will shift to the ECB's comments following the rate cut decision, which will provide further insight into their future policy direction.
The EURUSD is trading toward the high from May at 1.0894 and is up for the 3 straight day despite the expectation for a ECB hike and the Fed staying on hold. Will sellers lean against the high with stops on a break? I would expect sellers to take a shot with hopes of at least some pause.
With the EURUSD trading to a new high, the US shortened week begins with the DXY index (dollar index) testing the 200 and 100-day MAs.The 200 day MA comes in at 104.40. The 100-day MA comes in at 104.297. The low just reached a new day low at 104.335 between the two. The 38.2% of the move up from the December low comes in just below those MAsat 104.247. The cluster of support will be a key barometer for both buyers and sellers.
Today, Case Schiller monthly housing data for March will be released at 9 AM ETP. At 10 AM, consumer confidence data for May will be released with expectations of a dip to 95.9 from 97.0 last month.
US yields are lower today. US stocks are mixed after the NASDAQ closed at a record level on Friday. European indices are lower. Crude oil is higher.
A snapshot of the other markets as the North American session begins shows
- Crude oil is trading up $1.14 or 1.47% at $78.86. At this time Friday, the price was at $76.58.
- Gold is trading down $3.58 or -0.16% at $2347.14. At this time Friday, the price was higher at $2338.88
- Silver is trading down five cents or -0.17% at $31.58. At this time Friday, the price was at $30.48
- Bitcoin currently trades at $68,232. At this time Friday, the price was trading at $67,355
- Ethereum is trading at $3894.30. At this time Friday, the price trading at $3716
In the premarket, the snapshot of the major indices are mixed. On Friday, the NASDAQ index closed at a new record high level. Shares of Apple are higher after shipments in China surged 52% on a flurry of orders on the back of discounting at retailers. Shares of Apple are up 1.48% in pre-market trading. Nvidia shares are up 3% in premarket trading continuing the run higher after better earnings and the 10:1 stock split.
- Dow Industrial Average futures are implying a decline of -42.59 points. On Friday, the index rose 4.33 points or 0.01% at 39069.60.
- S&P futures are implying a gain of 8.25 points. On Friday, the index rose 36.86 points or 0.70% at 5304.71
- Nasdaq futures are implying a gain of 53 points or 0.28%. On Friday, the index rose 184.76 points or 1.10% at 16920.79.
European stock indices are trading lower today in the morning snapshot:
- German DAX, -0.09%
- France CAC , -0.64%
- UK FTSE 100, -0.32%
- Spain's Ibex, -0.05%
- Italy's FTSE MIB, -0.19% (delayed 10 minutes). For the week the index is down -2.88%
Shares in the Asian Pacific markets were lower across the board:
- Japan's Nikkei 225, -0.11%
- China's Shanghai Composite Index, -0.46%
- Hong Kong's Hang Seng index, -0.03%
- Australia S&P/ASX index, -0.28%
Looking at the US debt market, yields are lower:
- 2-year yield 4.920%, -3.3 basis points. At this time yesterday, the yield was at 4.943%
- 5-year yield 4.506%, -2.5 basis points. At this time yesterday, the yield was at 4.542%
- 10-year yield 4.459% -1.4 basis points. At this time yesterday, the yield was at 4.488%
- 30-year yield 4.576%, unchanged. At this time yesterday, the yield was at 4.589%
Looking at the treasury yield curve spreads remain in negative territory
- The 2-10 year spread is at -46.3 basis points. At this time yesterday, the spread was at -45.5 basis points.
- The 2-30 year spread is at -34.5 basis points. At this time yesterday, the spread was at -35.5 basis points.
In the European debt market yields in the benchmark 10 year yields are mixed:
