The USD is the strongest and the AUD is the weakest as the NA session begins

As the North American session begins, the USD is the strongest and the AUD is the weakest. The USD has rebounded in trading today (modestly admittedly) after the sharp fall yesterday on the back of the weaker/softer data including CPI, retail sales, NY Manufacturing index. Overnight in the Asia-Pacific session, Japan GDP (lower growth and higher prices) and Australian employment data (mixed) was released.

• Prelim GDP q/q: Actual -0.5% (Forecast -0.3%, Previous 0.1%)
• Prelim GDP Price Index y/y: Actual 3.6% (Forecast 3.3%, Previous 3.9%)

Australian Jobs Data

• Employment Change: Actual 38.5K (Forecast 22.4K, Previous -5.9K

• Unemployment rate: Actual 4.1% (Forecast 3.9%, Previous 3.9%)

There has been a lot of commentary from ECB officials today. ECB policymaker Pablo Hernandez de Cos stated that all indicators point toward a first rate cut in June, reaffirming what is widely anticipated. Despite earlier ECB statements about waiting for Q1 wages data at the end of the month, the expectation of a June rate cut remains strong. De Cos’s comments align with the prevailing sentiment that a rate cut is imminent, reflecting confidence in the indicators supporting this decision.

Later, ECB’s Centeno emphasized that monetary policy decisions are made on a meeting-by-meeting basis, reflecting the institution’s adaptive approach to economic conditions. There is a prevailing expectation among stakeholders that interest rate cuts will commence in June, driven by the observed and sustained decrease in inflation. Centeno expresses a preference for a gradual approach to these rate cuts, aiming to balance economic stability and growth.Finally, ECB’s Kazaks stated that rate cuts should be gradual and are best implemented during quarterly meetings when projections are released. He expressed relative comfort with the market’s current pricing of rate cuts, indicating no need to disrupt these expectations. Kazaks affirmed that conditions for a June rate cut are present, suggesting that only a significant economic surprise could prevent the ECB from proceeding with the planned adjustment.

In the US, New York Fed President John Williams commented that there is no immediate need for a rate cut or a rate hike. He noted that April’s Consumer Price Index (CPI) report is a positive development for inflation dynamics and that the overall trend of slowing inflation looks favorable. However, he remains cautious, as he is not yet confident that inflation is sustainably moving toward the 2% target. Williams described current monetary policy as restrictive but appropriate, and observed that while the job market remains tight, some of its excesses are diminishing.BoE’s Greene noted that inflation persistence has decreased since she joined the Monetary Policy Committee (MPC) last July. She emphasized that the burden of proof should lie in the continued waning of inflation persistence. Greene highlighted that upcoming data, released before the June meeting, will provide a clearer indication of the MPC’s progress. She also observed that while excess labor hoarding has diminished from its peak, it still poses a two-sided risk to the economic outlook.

There have been some key earnings releases this morning:

• Under Armour Inc (UAA) Q1 2024:

  • Adjusted EPS: $0.11 (Expected: $0.08) Beat
  • Revenue: $1.33 billion (Expected: $1.33 billion) Met

• Walmart Inc (WMT) Q1 2024:

  • Adjusted EPS: $0.60 (Expected: $0.52) Beat
  • Revenue: $161.51 billion (Expected: $159.52 billion) Beat
  • Total US Comp sales ex gas: +3.9% (Expected: +3.42%) Beat
  • Q2 Adjusted EPS view: $0.62-0.65 (Expected: $0.64) Mixed

• Deere & Co (DE) Q2 2024:

  • EPS: $8.53 (Expected: $7.86) Beat
  • Revenue: $15.24 billion (Expected: $13.28 billion) Beat
  • FY Net forecast: ~$7.4 billion (Previously guided: $7.5-7.7 billion) Mixed
  • Profit forecast cut on a demand slowdown Negative Outlook

• JD.Com Inc (JD) Q1 2024:

  • EPS: $0.78 (Expected: $0.64) Beat
  • Revenue: $36.00 billion (Expected: $35.66 billion) Beat

Today, the weekly US jobless claim data will highlight the economic calendar:

8:30am (USD)

• Unemployment Claims: Actual 219K (Forecast 231K)
• Building Permits: Actual 1.48M (Forecast 1.46M)
• Philly Fed Manufacturing Index: Actual 7.7 (Forecast 15.5)
• Housing Starts: Actual 1.42M (Forecast 1.32M)
• Import Prices m/m: Actual 0.2% (Forecast 0.4%)

9:15am (USD)

• Industrial Production m/m: Actual 0.1% (Forecast 0.4%)
• Capacity Utilization Rate: Actual 78.4% (Forecast 78.4%)

Fedspeak includes Fed Gov. Barr (10 AM ET), Cleveland Fed Pres. Mester (12 PM ET) and Atlanta Fed Pres. Bostic.(3:50 PM ET).

A snapshot of the other markets as the North American session begins has oil higher, gold near unchanged. Bitcoin remains above $66K after surging yesterday on risk-on sentiment:

• Crude oil is trading up $0.14 or 0.18% at $78.77. At this time yesterday, the price was at $77.51
• Gold is trading down $1.61 or -0.06% at $2384.50. At this time yesterday, the price was higher at $2361.20
• Silver is trading up two cents or 0.09% at $29.65. At this time yesterday, the price was at $28.75
• Bitcoin currently trades at $66,581. At this time yesterday, the price was trading at $62,442, but moved sharply higher on risk-on flows.

In the premarket, the major indices are little changed. Yesterday the Dow industrial average, S&P index, and NASDAQ index all closed at record levels.

• Dow Industrial Average futures are implying a gain of 20.02 points. Yesterday, the index rose 349.89 points or 0.88% at 39908.01
• S&P futures are implying a gain of 3.85 points. Yesterday the index rose 61.45 points or 1.17% at 5308.14
• Nasdaq futures are implying a decline of 22.85 points. Yesterday the index rose 231.21 points or 1.40% at 16742.39

European stock indices are trading mixed after Germany, France, UK closed at record levels yesterday,

• German DAX, -0.27%
• France CAC , -0.43%
• UK FTSE 100, +0.06%
• Spain’s Ibex, +0.02%
• Italy’s FTSE MIB, +0.23% (delayed 10 minutes).

Shares in the Asian Pacific markets were higher after the strong gains in the US yesterday:

• Japan’s Nikkei 225, +1.29%
• China’s Shanghai Composite Index, +0.08%
• Hong Kong’s Hang Seng index, +1.59%
• Australia S&P/ASX index, was 1.65%

Looking at the US debt market, yields are lower:

• 2-year yield 4.748%, +1.3 basis points. At this time yesterday, the yield was at 4.782%
• 5-year yield 4.353%, -0.2 basis points. At this time yesterday, the yield was at 4.418%
• 10-year yield 4.332%, -2.4 basis points. At this time yesterday, the yield was at 4.412%
• 30-year yield 4.479%, -3.7 basis points. At this time yesterday, the yield was at 4.568%

Looking at the treasury yield curve spreads:

• The 2-10 year spread is at -41.7 basis points. At this time yesterday, the spread was at -37.1 basis points.
• The 2-30 year spread is at -27.1 basis points. At this time yesterday, the spread was at -21.5 basis points.

European benchmark 10-year yields are mixed:

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