The strongest to the weakest of the major currencies
The AUD is the strongest and the USD is the weakest as the North American session begins. The RBA raised rates earlier this week. The BOC did the same yesterday in what was considered a surprise (although there was some debate). The CAD is mixed in early trading.
In news in Europe, GDP moved down -0.1% vs 0.0% for the 1Q.
The BOC decision led to increased speculation about a similar move by the Federal Reserve in its next week’s meeting. The RBA and BOC have raised rates this week. The RBNZ raised rates on May 24. As a result, the yields on the 10-year and 30-year Treasury notes, as well as the 2-year note, moved up. Citigroup now expects another 25 bp hike by the BOC in July.
The upcoming Federal Reserve meeting will take place next Wednesday, June 14. . Fed funds futures currently predict a 69% chance that the Federal Reserve (Fed) will not raise interest rates next week, with the remaining 31% odds indicating a potential 25 basis points hike. The markets will likely adjust their expectations based on the US Consumer Price Index (CPI) data set to be released on Tuesday. If the data indicates inflation is slowing down significantly, it could boost those expecting the Fed to “skip” a meeting and also benefit risk assets. Conversely, persistent inflation pressures could cause market anxiety, preparing for another potential rate hike by the Fed. The late call from Jefferson and Harker to “skip” a rate hike at the June meeting, right before the blackout period with no other speakers, has left markets unsure if this was a coordinated message from the central bank or just personal opinion. The indecisiveness reflected in the Fed funds futures odds suggests that markets will likely await the US CPI data next week before making any significant bets.
In corporate news, GameStop announced a shake-up in its leadership team, leading to a drop in its shares. The company terminated CEO Matt Furlong and appointed meme stock favorite Ryan Cohen as executive chairman. The move comes as GameStop strives to improve its sales, which have been on a downward trend due to the rising popularity of downloadable console games. US stocks are little changed in early US trading after the Dow rose yesterday but the Nasdaq index fell sharply (down -1.29%). European shares are higher in trading this morning. In Asian-Pacific trading the Nikkei 225 fell for the 2nd consecutive day after reaching record highs earlier this week.
On the international front, China’s four major state-backed banks announced they were cutting rates on yuan deposits. This decision comes as Beijing tries to stimulate consumption and investment amid disappointing export data and a struggling property market. The Shanghai composite Index rose 0.49% in trading today. The USDCNH reached another new high going back to the end of November 2022 before moving back and marginally lower on the day.
In the commodities market, oil prices continue trading volatility as traders grappled with mixed U.S. fuel inventories data. Although U.S. crude inventories fell unexpectedly last week, gasoline stockpiles increased for the first time in five weeks, causing some surprise given the start of the summer driving season, which typically boosts U.S. fuel demand. I wonder what the impact of the smoke effect from the Canada wildfires. Air traffic is being affected in the Northeast (there is a ground delay now due to smoke). The air quality in the New York City metro area was categorized as “very unhealthy”, scoring over 235 on the air-quality index due to PM 2.5 pollutants. This implies that individuals with heart or lung disease and other sensitive groups should avoid all physical activity outdoors. Everyone else should consider moving activities indoors or reschedule them to avoid prolonged or heavy exertion. Other cities such as Boston, Detroit, and Chicago were in the good to moderate category, while Philadelphia and Cleveland were rated unhealthy for at-risk groups. Washington, Nashville, Charlotte, and Atlanta had a moderate air quality index. The risk is somewhat limited still, but as the summer season begins, heading to the beach is not high on the list, nor is heading out if you don’t have to go. Google told employees to work from home. Nevertheless, crude oil prices are higher.
Weekly jobless claims will be released at 8:30 AM ET. The expectation is 235K vs 232K last week. Wholesale inventories will be released at 10 AM ET.
A snapshot of the markets currently shows:
- Crude oil is up $0.62 or 0.87% at $73.16
- Spot gold is trading up $6.55 or 0.34% $1946.76
- Silver is up $0.32 or 1.36% $23.72
- Bitcoin is trading at $26,428.
In the premarket for US stocks, the major indices are now trading marginally higher:
- Dow Industrial Average is trading up 5 points after yesterday’s 91.74 point rise
- S&P index is trading up 2.5 points after yesterday’s -16.35 point decline
- NASDAQ index is trading up down one point after yesterday’s -171.52 point decline
In the European equity markets, the major indices are also mostly higher.
- German DAX +0.30%
- Frances CAC +0.42%
- UK’s FTSE 100 unchanged
- Spain’s Ibex +0.43%
- Italy’s FTSE MIB +0.96%
In the Asian Pacific market today stock indices were mixed:
- Japan’s Nikkei fell -0.85% after yesterday’s -1.82% decline. Earlier this week the Nikkei was making all-time highs
- Hang Seng index rose 0.25%
- Shanghai composite index rose 0.49%
- Australia’s S&P/ASX 200 index fell -0.26%
In the US debt market yields are trading higher
- 2 year yield 4.567% up 1.7 basis points
- 5 year yield 3.951% +3.2 basis points
- 10 year yield 3.816% +3.3 basis points
- 30 year yield 3.973% +3.1 basis points
In the European debt market, benchmark 10 year yields are higher:
European benchmark 10 year yields