The AUD is the strongest and the JPY is the weakest as the North American session begins. Yesterday, the JPY was the strongest and the CHF was the weakest.
Yesterday, Fed Governor Jefferson and Fed Philadelphia President Harker both talked of skipping a rate hike in June (they are both voting members). Feds Mester did say, however, that she does not see a reason to not hike. That sent the expectations for a June hike tumbling from 60% for a 25 bp hike down to 30%.
The U.S. House of Representatives passed a bill raising the debt ceiling, mitigating the risk of a government default which was imminent by June 5th. This bill, which would suspend the debt ceiling until 2025, now waits approval from the Senate.
Economic data is anticipated in the form of the ADP National Employment Report today, and the all-important Labor Department's nonfarm payrolls report tomorrow (8:30 AM ET), which may influence the Fed's decision on interest rates in mid June.
Following the House's approval of the debt ceiling bill, U.S. stock futures are pointing to the upside, after declines in the major indices yesterday. The European shares are higher as well (fell yesterday).
Oil prices experienced some volatility but are back lower in early US trading. Chinese manufacturing activity overnight was stronger than expected, negating the weaker data the previous day. The China Caixin Manufacturing PMI came in at 50.9 versus 49.5 estimate and 49.5 last month. However gains in oil cannot be sustained .
In the Eurozone, the traditional data dump of PMI and other data kept traders engaged. The data was mixed to higher but still below the 50 level indicative or contractionary conditions. A summary of PMI data in EU showed:
- The Spanish Manufacturing PMI (EUR) was stronger than expected at 48.4, against an estimate of 47.9 and down from the previous 49.0.
- Italy's Manufacturing PMI (EUR) came in slightly stronger than expected at 45.9, against an estimate of 45.8 but down from the previous 46.8.
- The French Final Manufacturing PMI (EUR) was weaker than expected at 45.7, versus an estimate and previous reading of 46.1.
- Germany's Final Manufacturing PMI (EUR) came in slightly stronger than expected at 43.2, versus an estimated and previous reading of 42.9.
- The Eurozone's Final Manufacturing PMI was slightly stronger than expected at 44.8, versus an estimated and previous reading of 44.6.
Meanwhile in the UK
- The UK's Final Manufacturing PMI came in stronger than expected at 47.1, versus an estimated 46.9 and previous reading of 46.9.
- UK Mortgage Approvals came in weaker than expected at 49K, versus an estimated 54K and down from a previous 51K.
The CPI data out of the EU moved lower. Germany and France showed weaker readings yesterday which was a prelude to the data today.
- The Eurozone's CPI Flash Estimate for the year was slightly weaker than expected at 6.1%, against an estimate of 6.3% and down from the previous reading of 7.0%.
- The Eurozone's Core CPI Flash Estimate for the year came in weaker than expected at 5.3%, versus an estimated 5.5% and down from the previous 5.6%.
The EZ unemployment rate remained at record low levels
- The Eurozone's Unemployment Rate was as expected at 6.5%
German retail sales rebounded from last month but was less than expectations.
- German Retail Sales (EUR) for the month were slightly weaker than expected at 0.8%, versus an estimate of 1.0% and improved from a decline of 1.3% in the previous month.
In the latest ECB minutes, there was evident debate over the decision to increase the key interest rates. Some members initially supported a 50 basis point increase due to concerns about inflation, but a consensus aligned on a 25 basis point rise. The ECB's communication was seen as essential in conveying a clear "directional bias" for further rate increases. Members expressed a strong preference against returning to outright forward guidance on policy rates. On inflation, members noted it appeared to be more persistent in the Euro area compared to the US.
The EURUSD and the GBPUSD are continuing their move to the upside. Yesterday the EURUSD reached a new low for the month, but rebounded into the close and continued the move higher today. The GBPUSD moved above its 38.2% retracement of the May trading range today at 1.24493 and is making new session highs in early North American trading up to 1.24822
The North American calendar is pretty full as the new month begins. Below is the schedule of the major releases:
- 8:15 AM ET: USD ADP Non-Farm Employment Change: 173K (Estimate), 296K (Last)
- 8:30 AM ET: USD Unemployment Claims: 236K (Estimate), 229K (Last)
- 8:30 AM ET:USD Revised Nonfarm Productivity q/q: -2.6% (Estimate), -2.7% (Last) USD Revised Unit Labor Costs q/q: 6.2% (Estimate), 6.3% (Last)
- 9:30 AM ET: CAD Manufacturing PMI: 50.2 (Estimate)
- 9:45 AM ET: USD Final Manufacturing PMI: 48.5 (Estimate & Last)
- 10 AM ET: USD ISM Manufacturing PMI: 47.0 (Estimate), 47.1 (Last) USD ISM Manufacturing Prices: 52.4 (Estimate), 53.2 (Last)
- 10 AM ET USD Construction Spending m/m: 0.2% (Estimate), 0.3% (Last)
The US Bureau of Labor Statistics (BLS) is scheduled to release their key employment data at 8:30 AM ET on Friday. Below are the estimates and the last reported figures for each component:
- Average Hourly Earnings m/m: The estimate is a 0.3% increase, compared to the last reported increase of 0.5%.
- Non-Farm Employment Change: The estimate is a gain of 193K jobs, following the last reported gain of 253K jobs.
- Unemployment Rate: The estimate is 3.5%, slightly higher than the last reported rate of 3.4%.
Crude oil is trading The private oil data released late yesterday showed surprise builds in the current week:
- Crude oil inventories build of +5.2 million barrels versus a drawer -1.4 million barrels
- Cushing build of +1.8 million barrels
- Gasoline inventories build of +1.9 million barrels versus a draw of -0.5 million barrels expected
- Distillates build of 1.8 million barrels versus expected 0.9 million barrels
A snapshot of the markets are showing:
- Crude oil is trading down $0.30 or -0.43% at $67.80
- Gold is trading up $4.27 or 0.21% at $1967.01
- Silver is trading down $0.03 or -0.11% to $23.46
- Bitcoin is trading at $26,891. Bitcoin was trading at $27,114 near the 5 PM ET close yesterday
In the premarket of US stocks the major indices are marginally higher:
- Dow Industrial Average is up 19.73 points points after yesterday's -134.51 point decline
- S&P index up 10 points points after yesterday's -25.69 point
- NASDAQ index is up 28 points points after yesterday's -82.13 point acquire
In the European equity markets, the major indices are higher after the declines yesterday
- German DAX 0.98%. Yesterday the index fell -1.54%
- Frances CAC 0.49%. Yesterday the index fell -1.54%
- UK's FTSE 100 0.43%. Yesterday the index fell -1.01%
- Spain's Ibex 1.12%. Yesterday the index fell -1.28%
- Italy's FTSE MIB 1.5%. Yesterday the index fell -1.97%
In the US debt market, US yields are marginally higher. Yesterday yields moved lower
- 2-year yield 4.423% +3.4 basis points
- 5-year yield 3.763% +2.0 basis points
- 10-year yield 3.642% +0.6 basis points
- 30-year yield 3.847% -1.0 basis points
In the European debt market, benchmark 10 year yields are mixed:
