The dollar index (DXY00) today is down by -0.05%. The dollar is under pressure as today’s rally in the S&P 500 to a new record high has reduced liquidity demand for the dollar. Also, strength in the euro today is undercutting the dollar on better-than-expected Eurozone economic reports. The dollar recovered more than half of its losses after the 10-year T-note yield rose to a 1-week high when weekly jobless claims fell more than expected and the May S&P manufacturing PMI unexpectedly increased, hawkish factors for Fed policy.
The US Apr Chicago Fed national activity index fell -0.19 to -0.23, weaker than expectations of +0.13.
US weekly initial unemployment claims fell -8,00 to 215,000, showing a stronger labor market than expectations of 220,000.
The US May S&P manufacturing PMI unexpectedly rose +0.9 to 50.9, stronger than expectations of a decline to 49.9.
US Apr new home sales fell -4.7% m/m to 634,000, weaker than expectations of 678,000.
The markets are discounting the chances for a -25 bp rate cut at 0% for the June 11-12 FOMC meeting and 12% for the following meeting on July 30-31.
EUR/USD (^EURUSD) today is up by +0.12%. The euro today recovered from a 1-week low and is moderately higher. Short covering emerged in the euro on today’s stronger-than-expected reports on Eurozone Q1 wages and Eurozone May S&P manufacturing PMI. The euro fell back from its best levels after the dollar recovered from early losses.
The Eurozone May consumer confidence index rose +0.4 to a 2-1/4 year high of -14.3, slightly weaker than expectations of -14.2.
Wage pressures are hawkish for ECB policy and supportive for the euro after the ECB reported that Eurozone negotiated wages in Q1 increased +4.7% y/y from +4.5% y/y in Q4 and matched a record.
The Eurozone May S&P manufacturing PMI rose +1.7 to a 15-month high of 47.4, stronger than expectations of 46.1. The May S&P composite PMI rose +0.6 to 52.3, stronger than expectations of 52.0 and the fastest pace of expansion in a year.
Swaps are discounting the chances of a -25 bp rate cut by the ECB at 90% for its next meeting on June 6.
USD/JPY (^USDJPY) is up by +0.17%. Today, the yen gave up an early advance and fell to a 3-week low against the dollar after the 10-year T-note yield jumped to a 1-week high. The yen today initially posted modest gains on stronger-than-expected Japanese economic reports on May Jibun Bank manufacturing PMI and Apr machine tool orders.
Japan Apr machine tool orders were revised upward to -8.9% y/y from the previously reported -11.6% y/y.
The Japan May Jibun Bank manufacturing PMI rose +0.9 to 50.5, the fastest pace of expansion in a year.
Swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 25% for the June 14 meeting.
June gold (GCM4) today is down -34.4 (-1.34%), and July silver (SIN24) is down -0.786 (-2.50%). Precious metals prices today are under pressure, with gold falling to a 1-week low on negative carryover from Wednesday afternoon’s hawkish minutes of the April 30-May 1 FOMC meeting. The minutes stated that policymakers favored keeping interest rates higher for longer to combat inflation. Losses in gold accelerated today after the 10-year T-note yield climbed to a 1-week high.
On the positive side for metals today is a weaker dollar. Demand for gold as an inflation hedge increased today on signs of wage pressures in Europe after the ECB reported Eurozone negotiated wages in Q1 increased +4.7% y/y from +4.5% y/y in Q4 and matched a record. Silver found some support today on the stronger-than-expected May manufacturing PMIs in the US, Eurozone, and Japan, a positive factor for industrial metals demand.
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.
