Just when it seemed that markets were in for another quiet run, volatility kicked in when U.S. traders returned to their desks after the Memorial Day holiday.
WTI crude oil surged more than 2% to reach the $80 per barrel mark once more while U.S. bond yields also chalked up significant gains after the Treasury auction.
How did the rest of the asset classes perform?
Headlines:
- Australian retail sales for April: 0.1% m/m (0.3% expected, -0.4% previous)
- BOJ core CPI for April: 1.8% y/y (2.2% expected, 2.2% previous)
- U.K. CBI realized sales for April: +8 (-24 expected, -44 previous)
- Canada’s industrial product price index for April: 1.5% m/m (0.8% expected, previous reading upgraded to 0.9% gain)
- Canada’s raw materials price index for April: 5.5% m/m (3.1% expected, previous reading downgraded from 4.7% to 4.3% gain)
- U.S. S&P/CS house price index for March: 7.4% y/y (7.3% expected, 7.3% previous)
- U.S. CB consumer confidence index for May: 102.0 (96.0 expected, previous reading upgraded from 97.0 to 97.5)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Tuesday was shaping up to be another snoozefest for majority of asset classes, with the exception of bitcoin which dipped below the $68,000 support area and crude oil which continued to enjoy upside momentum on resurfacing geopolitical tensions.
Gold and U.S. bond yields also tumbled early in the day, before the latter advanced during the U.S. Treasury auction. As it turned out, demand was still relatively sluggish for two-year and five-year notes, lifting the two-year yield by 2.8 basis points close to 5% and the five-year yield by 6.3 basis points.
U.S. equities had a mixed run, as the Nasdaq closed at yet another record level while the DJIA closed 0.55% lower and the S&P 500 index moved mostly sideways.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
The dollar was off to a shaky start since U.S. traders were still out enjoying the Memorial Day holiday. The U.S. currency slowly pulled higher leading up to the London session, before taking another tumble just ahead of the CB consumer confidence release.
Housing market indices turned out mixed for Uncle Sam, with the S&P/CS HPI ticking higher from 7.3% to 7.4% year-on-year in March instead of holding steady and the FHFA HPI falling short of estimates with a meager 0.1% month-on-month uptick versus the projected 0.5% gain.
The CB consumer confidence index for May beat estimates with a 102.0 reading versus the projected dip from 97.5 to 96.0, thanks to improvements in both expectations and present situation readings. The dollar already rebounded prior to the actual release and was able to hold on to its gains for the rest of the New York session.
Upcoming Potential Catalysts on the Economic Calendar:
- German preliminary CPI due
- German GfK consumer climate index at 6:00 am GMT
- Swiss UBS economic expectations index at 8:00 am GMT
- U.S. Richmond manufacturing index at 2:00 pm GMT
- FOMC member Williams’ speech at 5:45 pm GMT
- Fed Beige Book at 6:00 pm GMT
- RBA Assistant Governor Hunter’s speech at 10:50 pm GMT
- FOMC member Bostic’s speech at 11:00 pm GMT
The euro might be in for big moves in the London trading session, as its top economy Germany is set to print its preliminary CPI reading for May. Although the June ECB cut has been pretty much priced in, traders are still keen to see whether or not the latest round of inflation figures could bring consecutive easing moves from the central bank.
Later on, the Fed Beige Book release might also be worth keeping tabs on since this would contain further insights on how the districts are faring, likely impacting Fed policy expectations.
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