The AUD is the strongest and the USD is the weakest as the North American session begins.. The currencies are seeing a rebound versus the greenback after the declines this week despite concerns about the US debt ceiling all week. Expectations for a tighter Fed, has been supportive of the USD this week (around 50% for a June hike with a higher percentage for July).

As the deadline for the U.S. debt ceiling looms, ongoing talks between lawmakers remain unfruitful with a potential default mere days away. President Joe Biden and top House Republican Kevin McCarthy are inching closer to a potential arrangement to lift the $31.4 trillion borrowing limit for two years and cap spending. However, the deal is yet to be finalized and would need swift congressional approval to prevent the federal government from running out of funds by June 1.

In the premarket for US stocks, the mood in the futures is pointing marginally higher following up the large move higher in the Nasdaq yesterday on the back of Nvidia’s 24% move to the upside (earnings and forecasts beat expectations). The Dow meanwhile is looking to snap a 5-day decline today being up in pre-market trading. Today, the focus will be on the release of key inflation data and tracking the debt ceiling negotiations as the clock ticks.

Speaking of which, many Federal Reserve officials are cautious but are also keenly awaiting the release of the Core Personal Consumption Expenditures (PCE) price index at 8:30 AM today, their preferred inflation measure (and other inflation and employment statistics before they meet again in mid-June). The recent economic data has traders reassessing forecasts for the Fed’s future interest rate path (the odds-on-favorite is to have a hike between now and July), this upcoming release is of significant interest.

Today,

• Core PCE Price Index month over month (m/m) is expected to remain consistent with previous estimates at 0.3%, suggesting stable inflation in the economy. Personal Income m/m is forecasted to report at 0.4%, indicating an improvement over the last estimate of 0.3%. Personal Spending m/m is expected to increase significantly to 0.4% compared to the last reported figure of 0.0%, signaling potential robust consumer behavior.

• Durable Goods Orders m/m are anticipated to decline to -1.0% from the previous estimate of 2.8% (revised from 3.2%), suggesting potential headwinds for the economy. The Core Durable Goods Orders m/m are forecasted to report at -0.1%, which is lower than the previous estimate of 0.2%, indicating a potential slowdown in the manufacturing sector.

• The Goods Trade Balance for April is expected to report a deficit of -85.6B, a slight worsening from the previous estimate of -84.6B.

Later at 10 AM ET:

• Final University of Michigan Consumer Sentiment is expected to come in at 57.7 (same as flash estimate of 57.7). Last month was at 63.5.

• The Inflation Expectations are predicted to hold steady at 4.5%, in line with the flash release, down from 4.6%. The 5-year inflation flash was at 3.2%.which was up from 3.0% last month

Gold prices, typically a safe-haven asset, are experiencing some volatility due to the uncertainties surrounding the debt ceiling talks. Despite an earlier dip, prices are now climbing, driven by a weaker dollar. Meanwhile, oil prices are also on the rise following discussions around a possible production cut by OPEC+. While Russia has downplayed further cuts, Saudi Arabia’s Energy Minister urged caution, leading to a precarious sentiment in the oil market.

IN the European session, ECB’s Vujcic expressed concerns about persistent inflation momentum, doubting the possibility of achieving a 2% target within the next two years, despite earlier projections forecasting a return to this target by the second half of 2025, with updated projections and the next Eurozone Flash Inflation print due next week. The UK retail sales came in at 0.5% which is higher than the 0.3% expected and up from the -1.2% last month.

Reminder, the US and most of Europe will be on the 3-day weekend which can influence market price action, especially with the debt ceiling talks still a key market theme.

A snapshot of the market currently shows:

• WTI crude oil is up $0.68 or 0.95% at $72.51.
• Gold is trading up $11.53 or 0.59% at $1951.45.
• Silver is up $0.44 or 1.95% at $23.16.
• Bitcoin is trading at $26,466 little change from yesterday’s levels closing levels. The low price for the week was reached yesterday at $25,878.

In the premarket for US stocks

• Dow industrial average is up 76.35 points after yesterday’s -35.27 point decline
• S&P index index is up 10.22 points after yesterday’s 36.04 point decline. The key 100 week moving averages at the natural resistance target of 4200. Yesterday the index closed at 4151.27
• NASDAQ index is up 58.47 points after surging 213.93 points yesterday (the largest gain since May 5). Nvidia shares which rose 24.37 points yesterday are currently up 0.55% in premarket trading.

In the European equity markets, the major indices are trading higher:

• German DAX +0.35%
• Frances CAC +0.46%
• UK’s FTSE 100 +0.24%
• Spain’s Ibex +0.11%
• Italy’s FTSE MIB +0.19%

In the US that market:

• 2 year yield is a 4.50% down 1.0 basis points
• 5 year yield 3.881% -1.5 basis points
• 10 year yield 3.786% -2.8 basis points
• 30 year yield 3.971% -3.2 basis points

Benchmark 10 year yields in your bar mix with the UK 10 year down 4 basis points the outlier despite the better-than-expected retail sales.

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