The dollar index (DXY00) today is down by -0.08% at a 1-1/2 week low. Strength in the British pound is undercutting the dollar as (^GBPUSD) today rallied to a 2-1/4 month high. The dollar recovered from its worst levels after the Conference Board US May consumer confidence index unexpectedly rose and after Minneapolis Fed President Kashkari said the Fed should take its time before cutting interest rates.
The Conference Board US May consumer confidence index unexpectedly rose +4.5 to 102.0, stronger than expectations of a decline to 96.0.
The US Mar S&P CoreLogic composite-20 home price index rose +7.38% y/y, stronger than expectations of +7.30% y/y and the biggest increase in 17 months.
The US May Dallas Fed manufacturing outlook survey unexpectedly fell 4.9 to -19.4, weaker than expectations of an increase to -12.1.
Minneapolis Fed President Kashkari said the US economy has remained "remarkably resilient," and the Fed should take its time to monitor whether inflation is slowing enough to warrant interest rate cuts.
The markets are discounting the chances for a -25 bp rate cut at 0% for the June 11-12 FOMC meeting and 10% for the following meeting on July 30-31.
EUR/USD (^EURUSD) today is up by +0.06% at a 1-1/2 week high. The euro is slightly higher today due to the dollar's weakness. Also, hawkish comments today from ECB Governing Council member Holzmann were supportive of the euro when he said he won't automatically support additional rate cuts by the ECB after June's rate cut. Limiting gains in the euro was today’s ECB report that showed a decline in April inflation expectations, a dovish factor for ECB policy.
The ECB Apr 1-year CPI expectations rate eased to +2.9% from +3.0% in March, right on expectations and the lowest in 2-1/2 years. Also, the Apr 3-year CPI expectations rate eased to +2.4% from +2.5% in March, slower than expectations of no change at +2.5%.
ECB Governing Council member Holzmann said he "will support" next week's interest rate cut by the ECB but won't automatically support moves after June's rate cut.
ECB Governing Council member Knot said the ECB is increasingly confident of bringing consumer price growth back to 2% next year and can loosen its "historically tight" monetary policy step by step.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 94% for its next meeting on June 6.
USD/JPY (^USDJPY) today is up by +0.05%. The yen today gave up an early advance and turned lower after T-note yields moved higher. The yen today initially moved higher against the dollar on news that showed Japan's Apr PPI services prices rose by the most in 9 years, which pushed the 10-year JGB bond yield up to a 12-year high of 1.044% and is hawkish for BOJ policy.
Japan Apr PPI services prices rose +2.8% y/y, stronger than expectations of +2.3% y/y and the largest increase in 9 years.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 27% for the June 14 meeting.
June gold (GCM4) today is up +14.9 (+0.64%), and July silver (SIN24) is up +1.171 (+3.84%). Precious metals prices today are climbing, with silver prices sharply higher. A weaker dollar today is supportive of metals. Also, ongoing tensions in the Middle East have boosted safe-haven demand for gold. Silver has carryover support from today’s +1% jump in copper prices after China added measures to support the property market, which improved the demand outlook for industrial metals.
Precious metals fell back from their best levels after US May consumer confidence unexpectedly increased. Also, hawkish comments from Minneapolis Fed President Kashkari weighed on precious metals when he said the Fed should take its time to monitor whether inflation is slowing enough to warrant interest rate cuts.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
