As the North American session begins, the GBP is the strongest and the NZD is the weakest. The USD is the mostly but modestly stronger with gains vs all the major currencies in the morning snapshot. Having said that, the
- EURUSD only has a 15 pip up and down trading range (vs 58 pip average over the last month of trading),
- USDCAD is in a 19 pip trading range (vs 69 pip average over the last month of trading),
- USDCHF only 20 pips (vs 54 average),
- AUDUSD 24 pips (vs 56 pips) and
- NZDUSD 26 pips (vs 50 pip average).
The USDJPY has a 52 pip range, but that is well short of the recent average of 153 pip average (thanks to some intervention by the BOJ along the way).
The point is, the price action is not that great to start the last day of the US session this week.
Coming into the day, BOEs Huw Pill spoke/is speaking and highlighted the significance of focusing on the persistent components of inflation, beyond just the headline rate. Pill noted that the more enduring parts of inflation are showing signs of a decline. He emphasized that the central bank might consider reducing the bank rate once there is sufficient evidence that these persistent inflation elements are on a downward trajectory. Pill also cautioned that concentrating solely on the upcoming Bank of England meeting would be somewhat misguided, underscoring the importance of looking at the underlying factors of inflation.
The minutes from the ECB's April 2024 policy meeting were just released and said that members are considering the possibility of easing monetary policy as early as the June meeting, contingent upon receiving additional evidence that supports the medium-term inflation outlook projected in March. Although a few members were already confident enough to advocate for a reduction in policy rates at the current meeting, there was a broad consensus to wait for more substantial data. This decision reflects a balanced view of the risks between prematurely lowering rates and potentially missing the inflation target, which could lead to a significant downturn in economic activity. The discussions emphasized the importance of a data-dependent approach, cautioning against overreliance on any single data point given the likely volatility in economic indicators. The ECB aims to maintain flexibility in its decisions and has successfully communicated its strategies to the markets, which are now anticipating the possibility of a rate cut in June.
Today the preliminary University of Michigan sentiment will be released at 10 AM PT with expectations of 76.0 versus 77.2 last month. The current conditions came in at 79.0 last month while the expectations was at 76.0 with expectations of 75.0 this month.
Also on the calendar today will be Canada's employment statistics which will be released at 8:30 AM. The expectations are for
- Employment change of 18.0K versus -2.2K last month.
- Unemployment rate is expected to rise to 6.2% from 6.1%.
- Full-time employment last month came in at -0.7K
- Part-time employment fell by -1.6K.
- Participation rate came in at 65.3 last month.
On the Fed Speak calendar today:
- 9 AM ET Federal Reserve Board Governor Michelle Bowman speaks on "Financial Stability Risks: Resiliency and the Role of Regulators" before the Texas Bankers Association Annual Convention
- 10 AM ET Federal Reserve Bank of Dallas President Lorie Logan participates in a moderated question-and-answer session before the Louisiana Bankers Association Annual Conference
- 1 PM ET Federal Reserve Bank of Minneapolis President Neel Kashkari introduces Federal Reserve Bank of Chicago President Austan Goolsbee and moderator Steve Liesman of CNBC in a question-and-answer session before Economic Club of Minnesota luncheon
- 1:30 PM ET Federal Reserve Vice Chair for Supervision Michael Barr gives commencement speech before the American University School of Public Affairs Graduation ceremony. Barr is in charge of regulation and supervision and may not speak on policy directly
In geopolitical news, the below tweet (or X) sums it up but the situation is still fluid of course:
A snapshot of the other markets as the North American session begins has oil higher, gold higher and bitcoin higher.
- Crude oil is trading up $0.62 or 0.79% at $79.88. At this time yesterday, the price was at $79.61
- Gold is trading up 27.57 points or 1.18% at $2373.07. At this time yesterday, the price was higher at $2315.90
- Silver is trading up $0.29 or 1.02% at $28.60. At this time yesterday, the price was at $27.71.
- Bitcoin currently trades at $63,021. At this time yesterday, the price was trading at $61,120
In the premarket, the Dow is working on its eighth day in a row higher. The S&P and Nasdaq has had a more choppy trading environment but are coming off gains from yesterday. All the major indices are also higher for the week. A summary of the indices as implied by futures are currently showing:
- Dow Industrial Average futures are implying a gain of 107 points or 0.20%. Yesterday, the index rose 331.37 points or 0.85% at 39387.77. The Dow Industrial Average average is up 1.84% this week.
- S&P futures are implying a gain of 15.92 points or 0.20%. Yesterday the index rose 26.41 points or 0.51% at 5214.07. The S&P index is up 1.68% coming into the day.
- Nasdaq futures are implying a gain of 71 points or 0.36%. Yesterday the index rose 43.51 points or 0.27% at 16346.26. The NASDAQ index is up 1.18% this week.
European stock indices are trading higher. German, France and UK indices are on pace to close at a record levels. France is on pace to join the other two indices today:
- German DAX, +0.54%. The German DAX is up 4.38% this week the largest gain since November 2023.
- France CAC , +0.67%. The index is up 3.59% this week. Matt is on pace for the largest gain since 3.71% in October 2023. At current levels the CAC is on pace to close at a record level.
- UK FTSE 100, 0.78%. The index is up 2.86% this week and trading at a new record high.
- Spain's Ibex, +0.64%. The index is up 2.41% this week.
- Italy's FTSE MIB, +1.04% (delayed 10 minutes). The index is up 3.23% this week.
Shares in the Asian Pacific markets were mixed/higher:
- Japan's Nikkei 225, +0.41%. The index closed the week near unchanged
- China's Shanghai Composite Index, +0.01%. The index closed up 1.60% this week
- Hong Kong's Hang Seng index, +2.3%. The index closed up 2.64% this week.
- Australia S&P/ASX index, +0.39%. The index closed up 1.6% this week.
Looking at the US debt market, yields are higher. Today the U.S. Treasury will auction off 30-year notes. Earlier this week, the 3- year note 10-year notes were auctioned with average (10 year) to slightly better than average (3-year) demand.
- 2-year yield 4.827%, +2.1 basis points. At this time yesterday, the yield was at 4.844%. 2-year yield are up 1.2 basis points this week.
- 5-year yield 4.482%, +2.3 basis points. At this time yesterday, the yield was at 4.518%. 5-year yield the down 1.1 basis points this week
- 10-year yield 4.466%, +1.8 basis points. At this time yesterday, the yield was at 4.514%. 10 year yields are down -3.5 basis points this week
- 30-year yield 4.610%, +4.0 basis points. At this time yesterday, the yield was at 4.670%. 30-year yield it down -4.4 basis points this week.
Looking at the treasury yield curve spreads:
- The 2-10 year spread is at -36.1 basis points. At this time yesterday, the spread was at -33.3 basis points. The yield spread has steepened by 5.1 basis points this week but still remains solidly in negative territory
- The 2-30 year spread is at -21.7 basis points. At this time yesterday, the spread was at -17.3 basis points. The yield spread has steepened by 6.5 basis points this week.
European benchmark 10-year yields are lower today.
