How did the major assets trade following the U.S. CPI report and the Fed’s June decision?
We have the deets on Thursday’s market headlines and price action that you need to know about!
Headlines:
- Australian employment change in May: 39.7K (30.5K expected, 37.4K previous); Unemployment rate down from 4.1% to 4.0% as expected
- Switzerland’s PPI weakened from 0.6% m/m to -0.3% m/m (0.5% expected) “primarily due to a fall in pharmaceutical product and petroleum product prices”
- Euro Area’s industrial production for April declined from a downwardly revised 0.5% m/m to -0.1% m/m in April
- U.S. PPI for May: -0.2% m/m (0.1% forecast, 0.5% previous) mainly due to lower energy prices; Core PPI at 0.0% (0.3% forecast, 0.5% previous)
- U.S. initial jobless claims rose from 229K to a 10-month high of 242K (vs. 225K forecast) in the week ending June 8
- BusinessNZ manufacturing PMI contracted faster from 48.8 to 47.2 in May; Recent PMIs “suggest Q2 will also be weak and potentially weaker than we already anticipate”
- New Zealand’s food price index slowed down from 0.6% m/m to -0.2% m/m in May
- BOC Deputy Governor Sharon Kozicki said she’s “seeing more signs that underlying price pressures are easing.”
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
After a volatile U.S. session, the major assets saw relatively more subdued price action during the Asian session as traders digested the U.S. headlines.
Bitcoin (BTC/USD) and spot gold prices extended their declines, however, and didn’t let up on their intraday downtrends until halfway through the U.S. session trading.
U.S. crude oil prices were all over the charts as traders priced in cooler U.S. inflation possibly leading to a Fed rate cut but also Wednesday’s EIA report reflecting a buildup in U.S. crude oil stockpiles AND Russia pledging to meet its oil production quotas (after admitting that it exceeded quotas in May).
Global equities were a bit more mixed, with the Asian and European stocks seeing more subdued demand while the U.S. S&P 500 and NASDAQ registered new record highs due to continued strength in the tech sector.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar gained pips at the start of Asian session trading as traders caught up to the Fed’s “hawkish hold” event.
The Greenback lost some of its gains at the start of the European session, possibly due to profit-taking, but soon traded higher as headlines over Europe’s political uncertainty and MSCI’s rejection of EU bonds from its sovereign debt indices gained traction.
Later, USD sellers pounced after weaker-than-expected U.S. PPI numbers confirmed cooling inflationary pressures reflected by the CPI report. The weekly initial jobless claims jumping to 10-month highs AND U.S. 10-year bond yields dropping to new intraweek lows may have also limited USD demand.
Still, the dollar managed to maintain its gains against all of its major counterparts except for the Swiss franc.
Upcoming Potential Catalysts on the Economic Calendar:
- BOJ’s policy decision and presser scheduled during the Asian session
- Japan’s revised industrial production at 4:30 am GMT
- France’s final CPI at 6:45 am GMT
- Italy’s trade balance at 8:00 am GMT
- U.K.’s consumer inflation expectations at 8:30 am GMT
- Canada’s manufacturing sales at 12:30 pm GMT
- Canada’s wholesale sales at 12:30 pm GMT
- U.S. preliminary UoM consumer sentiment and inflation expectations at 2:00 pm GMT
- ECB President Christine Lagarde to give a speech at 5:30 pm GMT
The Bank of Japan (BOJ) may rock the markets yet with an anticipated policy decision that may see changes to the bank’s bond-buying plans.
Meanwhile, a U.S. inflation expectations release – a report that the Fed has cited before – could add drama to Fed interest rate cut debates during the U.S. session.
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