US traders returned to the stock and bond markets today after the Juneteenth holiday yesterday. Of course, the forex market never sleeps so it was open yesterday, but price action was more limited.
The strongest to weakest of the major currencies
Today, the forex market saw the JPY as the strongest of the major currencies, while the AUD was the weakest. The AUD decline was helped by less than hawkish RBA meeting minutes and slower China growth. Although the PBOC cut the one and 5-year loan prime rate by 10 basis points to 3.55% and 4.20% respectively, that was disappointing to traders. The AUD and NZD can be reactionary to China’s economic fortunes. The USD was mostly higher with only declines vs the JPY as it reacted to lower rates.
In the US today, Building permits in May exceeded expectations, showing a 5.2% month-on-month (MoM) increase compared to the anticipated 0.6%. The annualized rate rose to 1.491M from 1.416M last month. Housing starts also rose well above expectations with a gain of rise of 21.7% MoM to an annualized rate of 1.631M (expected 1.400M). Last month, the housing starts were at 1.340M. That gain was the largest monthly increase since October 2016.
Not so robust was the Philadelphia Fed Non-manuafacturing index which fell -16.6 in June vs -16.0 in May. Most of the indexes declined significantly: firm level business activity index stood at -7.5 compared to -9.5 in May, new orders index fell to -16.2 from a previous 2.7, and a notable shift was observed in the employment component with the full-time employment index plunging to -14.3 from 14.9 in May. Part-time employment also decreased to -8.8 from -1.3, while average work week, unfilled orders, inventories, capital expenditures, and sales/revenues all recorded negative readings. The wage and benefit cost index, too, decreased to 22.2 from 35.3 in May.
Looking at the prices paid and received, they too showed weaker readings. The prices paid index, which measures the cost of inputs, fell by 21 points to 20.8 – the lowest reading since October 2020. In terms of the prices for their own goods and services, the prices received index dropped from 21.6 to -5.8, marking its first negative reading since August 2020. Nearly 12% of the firms reported a decrease in prices received, outpacing the 6% that saw increases in prices received. The majority of firms (60%) reported no changes in the prices of their own goods and services. This data suggests less widespread increases in input costs, alongside a general decline in prices for firms’ own goods and services
Although Fed’s Barr, Williams and Bullard all spoke today, each did not speak to policy or specifics regarding the economy. Tomorrow and on Thursday, however, Fed Chair Powell will be testifying on Capitol Hill. The Fed last week, skipped a hike but did prepare the markets for 50 basis points of hikes left in 2023 (dependent on the data).
Tomorrow, in addition to the Fed Chair testimony, UK inflation data will be released. The GBPUSD traded back below its 100 hour MA today at 1.2762, to a low of 1.2713, but rebounded back to the MA into the 5 pm close. Canada will release retail sales and Feds Cook, Jefferson and Goolsbee will all be speaking.
A snapshot of other markets today showed:
- Crude oil prices fell by at -1.17%
- Gold fell in reaction to the higher dollar. It is trading down $-13.41 or -0.69% at $1935.70
- Silver is trading down $0.78 or -3.27% at $23.14
- Bitcoin rallied today and is trading back at $28,143. The price will back above its 100 day moving average at $27,620
The major US stock indices all fell to start the trading week, with the Dow industrial average faring the worst:
- Dow industrial average fell -0.72%. It has been up for 3 consecutive weeks
- S&P index fell -0.47%. It has been up for 5 consecutive weeks
- NASDAQ index fell -0.16%. It is been up for 8 consecutive weeks
In the US at that market, yields are lower:
- 2-year yield 4.684% -3.8 basis points
- 5-year yield 3.944% -4.9 basis points
- 10-year yield 3.718% -5.0 basis points
- 30-year yield 3.812% -4.4 basis points