The EUR is the strongest and the JPY is the weakest as the NA session begins

The EUR is the strongest and the JPY is the weakest as the North American session begins. Once again movement is limited coming into the session with the trading ranges for all but the GBPUSD less than 44% of what is a normal range for a trading day in the major currency pairs over the last month of trading. The GBPUSD has traded 73% of what is the normal day.

The UK jobless rate ticked a little higher, meeting estimates as employment declined again in March. The payrolls for April also stayed in negative territory, although there was a significant revision higher to the March numbers. Overall, the data is not too helpful for the BOE as it likely points to softening in jobs but wage pressures are continuing to hold higher for now.

Also, in the UK, BOE chief economist Huw Pill stated that while significant progress has been made in returning inflation to the target, more work is needed to bring it back to the 2% level. The focus remains on the labour market, pay growth, and services prices, with the labour market described as historically tight. Pill emphasized the necessity of maintaining a restrictive monetary policy stance to combat domestic inflation persistence. However, he also indicated that it might be reasonable to consider rate cuts over the summer, suggesting that enough confidence might be achieved to allow for such adjustments while still maintaining a restrictive policy stance.

This morning, the US NFIB Small Business Optimism Index rose to 89.7, exceeding the expected 88.5 and the previous month’s figure of 88.5. This marks the first increase in the index for the year, although it remains below the 50-year average of 98 for the 28th consecutive month. Among the concerns reported by business owners, inflation was identified as the most significant issue by 22% of respondents, a decrease of 3 points from March. Despite the slight improvement in optimism, the ongoing challenges reflect persistent economic uncertainties for small businesses.

As expected, the United States has announced significant tariff hikes on a variety of Chinese imports, impacting roughly $18 billion worth of goods. These measures include:

1. Steel and Aluminum Products: The tariff rate on certain steel and aluminum products under Section 301 will increase from the current range of 0-7.5% to 25% in 2024.

2. Semiconductors: The tariff rate on semiconductors will rise from 25% to 50% by 2025.

3. Electric Vehicles (EVs): The tariff rate on electric vehicles will jump from 25% to 100% in 2024.

4. Lithium-Ion EV Batteries: The tariff rate on lithium-ion batteries used in electric vehicles will increase from 7.5% to 25% in 2024.

5. Lithium-Ion Non-EV Batteries: The tariff rate on lithium-ion batteries not used in electric vehicles will go up from 7.5% to 25% by 2026.

6. Solar Cells: The tariff rate on solar cells will increase from 25% to 50% in 2024.

These tariff hikes represent a significant escalation in the trade tensions between the US and China, targeting key sectors such as automotive, renewable energy, and technology.

The economic calendar today and ahead will focus on the US PPI today and the US CPI tomorrow. Below is a look at the highlights for the rest of the day and the week:

• Tuesday, May 14

  • USD
    • 8:30 AM ET: Core PPI m/m: Expected: 0.2%, Last: 0.2%
    • 8:30 AM ET: PPI m/m: Expected: 0.3%, Last: 0.2%
    • 10 AM ET: Fed Chair Powell Speaks in Amsterdam
  • AUD
    • 9:30 PM ET: Wage Price Index q/q: Expected: 1.0% Last: 0.9%

• Wednesday, May 15

  • USD
    • 8:30 AM ET: Core CPI m/m: Expected: 0.3%, Last: 0.4%
    • 8:30 AM ET: CPI m/m: Expected: 0.4%, Last: 0.4%
    • 8:30 AM ET: CPI y/y: Expected: 3.4%, Last: 3.5%
    • 8:30 AM ET Empire State Manufacturing Index: Expected: -10.8, Last: -14.3
    • 8:30 AM ET Core Retail Sales m/m: Expected: 0.2%, Last: 1.1%
    • 8:30 AM ET Retail Sales m/m: Expected: 0.4%, Last: 0.7%
  • JPY
    • 7:50 PM ET: Preliminary GDP QoQ -0.4% versus +0.1%
  • AUD
    • 9:30 PM ET Employment Change: Expected: 25.3K, Last: -6.6K
    • 9:30 PM ET Unemployment Rate: Expected: 3.9%, Last: 3.8%

• Thursday, May 16

  • USD
    • 8:30 AM ET: Unemployment Claims: Last: 231K,
    • 8:30 AM ET: Philly Fed manufacturing index: expected 7.7. Last 15.5
    • 9:15 AM ET:US industrial production. Expected 0.2%. Last 0.4%
• Friday, May 17
  • USD
    • 10:15 AM ET: FOMC Waller speaks.

A snapshot of the other markets as the North American session begins has oil higher, gold lower.

• Crude oil is trading down -$0.18 or -0.23% at $78.95. At this time yesterday, the price was at $78.90
• Gold is trading up $7.20 or 0.31% at $2343.56. At this time yesterday, the price was higher at $2344.58
• Silver is trading up $0.15 or 0.53% at $28.35. At this time yesterday, the price was at $28.20
• Bitcoin currently trades at $61746. At this time yesterday, the price was trading at $63,021

In the premarket, the major indices are mixed/little changed

• Dow Industrial Average futures are implying a gain of 61 points or 0.10%. Yesterday, the index fell by – 81.33 points or -0.21% at 39431.52
• S&P futures are implying a gain of 4.58 points or 0.05% points. Yesterday the index fell -1.28 points or -0.02% at 5221.41.
• Nasdaq futures are implying a gain of 10 points or 0.10%. Yesterday the index rose 47.37 points or 0.29% at 16388.24

Meme stocks are soaring for the 2nd consecutive day after Roaring Kitty resurfaced yesterday after a 3 year absence from Twitter. Gamestop is trading up 116.96%, AMC is up 98.27%, Blackberry is up 24.52% and Koss is up 31.58%.

European stock indices are trading mostly higher a day after German Dax, France’s Cac and UK FTSE 100 came off record closing levels on Friday. Today Germany is marginally higher while France and UK markets are marginally higher. :

• German DAX, -0.14%
• France CAC , +0.03%
• UK FTSE 100, +0.18%
• Spain’s Ibex, +0.22%
• Italy’s FTSE MIB, was 0.66% (delayed 10 minutes). The index is up 3.23% this week.

Shares in the Asian Pacific markets were mixed/higher:

• Japan’s Nikkei 225, +0.46%
• China’s Shanghai Composite Index, -0.07%
• Hong Kong’s Hang Seng index, -0.22%
• Australia S&P/ASX index, -0.30%

Looking at the US debt market, yields are little changed:

• 2-year yield 4.842%, -1.5 basis points. At this time yesterday, the yield was at 4.848%.
• 5-year yield 4.491%, -0.8 basis points. At this time yesterday, the yield was at 4.496%
• 10-year yield 4.478%, -0.2 basis points. At this time yesterday, the yield was at 4.484%
• 30-year yield 4.626%, +0.4 basis points. At this time yesterday, the yield was at 4.69%

Looking at the treasury yield curve spreads:

• The 2-10 year spread is at -36.1 basis points. At this time yesterday, the spread was at -36.4 basis points.
• The 2-30 year spread is at -21.4 basis points. At this time yesterday, the spread was at -21.7 basis points.

European benchmark 10-year yields are little changed:

This article was written by Greg Michalowski at www.forexlive.com.