With not a lot of top-tier economic releases on tap, the markets focused on Fed speak and other asset-specific catalysts.
Which headlines caught traders’ attention on Monday?
We have the deets!
Headlines:
- Switzerland, Germany, France, and Canada’s markets out on holiday
- Rightmove: Avg. price of property coming to the market in the U.K. rose by 0.8% m/m in May (vs. 1.1% previous) as Spring season momentum exerted upward pressure
- As expected, the PBOC kept its 1-year and 5-year loan prime rates unchanged at 3.45% and 3.95% respectively in May
- Japan’s tertiary activity index decreased by 2.4% unexpectedly in March after rising by 2.2% in the previous month
- Iran confirmed the death of President Ebrahim Raisi, Foreign Minister Hossein Amir-Abdollahian, and other high-ranking officials following a helicopter crash
- In a speech, BOE Deputy Gov Ben Broadbent implied interest rates could be cut “over the summer” if data continued to line with their forecasts
- FOMC voting member Raphael Bostic said “it is going to take a while” before the Fed can be certain inflation is on track to hit 2% and that the “new steady state” for interest rates will likely be “higher than what people have known over the last decade”
- FOMC voting member Philip Jefferson said “It is too early to tell whether the recent slowdown in the disinflationary process will be long-lasting”
- FOMC voting member Michael Barr said Q1 2024 inflation data were “disappointing” and that they “need to allow our restrictive policy some further time to continue its work”
- FOMC voting member Loretta Mester said inflation was “a little bit stronger than I anticipated” and now sees fewer than three rate cuts in 2024
- Westpac: Australia’s consumer sentiment fell 0.3% to 82.2 in May as concerns about persistent inflation offset the optimism from the Federal Budget
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
With a lack of top-tier data releases and with most of the European markets out on holiday, the major financial assets either traded in ranges or took their cues from asset-specific catalysts.
Spot gold hit a fresh record high at $2,450 in late Asian session trading as more traders priced in the possibility of at least two interest rate cuts from the Fed this year following last week’s weak inflation data.
Crude oil prices also traded higher over the death of Iran’s President and emerging health concerns of Saudi Arabia’s king but the boost was temporary as there were no immediate signs of supply disruption to oil flows.
Meanwhile, bitcoin (BTC/USD) extended a bullish run above $70,000. There were no direct headlines but optimism for a potential spot ETF for ether (ETH/USD) may have bumped up bitcoin’s prices.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar traded in ranges in the Asian and early European sessions before a speech by FOMC voting member Raphael Bostic caused a pop in the 10-year U.S. yields and encouraged USD demand.
Aside from confirming his bias for only one rate cut this year, Bostic talked about a “new steady state” for U.S. interest rates that may be “higher than what people have known over the last decade.”
Speeches by other Fed members throughout the day also leaned toward waiting a bit more before cutting interest rates this year.
Upcoming Potential Catalysts on the Economic Calendar:
- ECB President Lagarde to give a speech at 8:00 am GMT
- Euro Area current trade balance at 9:00 am GMT
- Germany’s CBI industrial order expectations at 10:00 am GMT
- Canada’s inflation reports at 12:30 pm GMT
- FOMC voting member Christopher Waller to give a speech at 1:00 pm GMT
- FOMC voting member Thomas Barkin to give a speech at 1:00 pm GMT
- FOMC voting member John Williams to give a speech at 1:05 pm GMT
- FOMC voting member Raphael Bostic to give a speech at 1:10 pm GMT
- FOMC voting member Michael Barr to give a speech at 3:45 pm GMT
- BOE Gov. Andrew Bailey to give a speech at 5:00 pm GMT
- Japan’s core machinery orders at 11:50 pm GMT
- Japan’s trade balance at 11:50 pm GMT RBNZ’s policy decision at 2:00 am GMT, presser at 3:00 am GMT (May 22)
Fed members will once again dominate the headlines during the U.S. session but don’t sleep on the other major currencies as ECB President Lagarde and BOE Gov. Bailey take center stage and Canada drops its latest inflation reports!
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