As the North American session begins, the NZD is the strongest and the EUR is the weakest. The USD is mixed and in the middle of the table with a modest downward bias. Having said that, 6 of the 7 currencies are only up or down by 0.10% or less. Yesterday, the USD soared after US CPI came in stronger than expected and yields moved higher. JPMorgan Chase (now looking for July and November), SNB (sees September) and Wells Fargo (September) pushed out their forecast for the first rate cut (and lowered expectations for the year-end change). The markets are now pricing in 40 basis points of cuts between now and year-end (was about 68 basis points ahead of the CPI yesterday).
Arno posted an interesting table showing the rate path priced in for the major central banks (click here).
Today, we get the US PPI data with the expectations for 0.3% for the headline and 0.2% for the core measure. The market will be parsing the data for it's impact on the PCE which will be released a few weeks from now. The YoY has been more contained in the PPI but expected to rise due to calendar effects, with gains of 2.2% for the headline expected (up from 1.6% last month). The Core is expected at 2.3% from 2.0% last month.
US initial jobless claims will also be released. Last week the claims jumped to 221K. The expectation this week is 215K with continuing claims expected at 1.800M vs 1.791M last week.
The US treasury will continue (and complete) their coupon auctions with the 30 year bond auction at 1 PM ET. Yesterday, the 10 year sale did not go well with a 3.1 basis point tail, a low bid to cover, and low participation (vs the 6-month average) from both domestic and international investors. Today, yields are modestly higher.
Fedspeak today includes NY Fed Pres. Williams, Richmond Fed Pres Barkin, Boston Fed Pres. Collins and Atlanta Fed Pres. Bostic:
- 1245 / 0845 Federal Reserve Bank of New York President John Williams speaks before the Federal Home Loan Bank of New York 2024 Member Symposium
- 1400 / 1000 Federal Reserve Bank of Richmond President Thomas Barkin speaks before the National Council of Textile Organizational Annual Meeting
- 1600 / 1200 Federal Reserve Bank of Boston President Susan Collins speaks on the economy before an Economic Club of New York hybrid event
- 1730 / 1330 Federal Reserve Bank of Atlanta President Raphael Bostic participates in moderated conversation on "Leadership in Financial Services" before the Urban Financial Services Coalition 50th Anniversary Celebration
The ECB rate decision will be released at 8:15 AM ET with no change expected. Will the ECB give any hints for forthcoming action? Agent cut is priced at 72% currently. Market sees around 74 basis points by the end of the year (down from 83 basis points before the US CPI data yesterday). The EURUSD is skimming along support between 1.0722 and 1.07314. The 61.8% retracement of the move-up from the public 2023 low to the December high comes in at 1.07133. The low for 2024 comes in at 1.06942. On the topside, getting above 1.07605 could see more upside momentum with the 50% midpoint at 1.07946 being the next key barometer on the topside that would need to hold resistance if the sellers are to remain more in control.
US stocks moved lower yesterday, and are lower again in premarket futures trading today. Crude oil is lower with focus on the economy vs the geopolitical risk. Yesterday the US inventory data showed a larger-than-expected build in inventories.
A snapshot of the other markets as the North American session begins currently shows:
- Crude oil is trading down $0.51 or -0.59% at $85.70. At this time yesterday, the price was at $85.76
- Gold is trading up $6.68 or 0.29% at $2339.23. At this time yesterday, the price was $2347.70
- Silver is trading up seven cents or +0.25% at $27.96. At this time yesterday, the price was at $28.13
- Bitcoin currently trades at $70,062. At this time yesterday, the price was trading at $69,128
In the premarket, the major indices are trading lower before the PPI and claims data
- Dow Industrial Average futures are implying a decline of -182 points. Yesterday, the index fell -422.16 points or -1.09% at 38461.52
- S&P futures are implying a decline of 26.39 points. Yesterday, the index fell -49.27 points or -0.95% at 5160.65
- Nasdaq futures are implying a decline of -66 points. Yesterday, the index fell -136.28 points or -0.84% at 16170.36
The European indices are lower:
- German DAX, -0.73%
- France CAC , -0.31%
- UK FTSE 100, -0.34%
- Spain's Ibex, -0.85%
- Italy's FTSE MIB, -0.93% (delayed 10 minutes)
Shares in the Asian Pacific markets were mostly lower:
- Japan's Nikkei 225, -0.35%
- China's Shanghai Composite Index, +0.23%
- Hong Kong's Hang Seng index, -0.26%
- Australia S&P/ASX index, -0.44%
Looking at the US debt market, yields are little changed:
- 2-year yield 4.975%, +0.7 basis points. At this time yesterday (before the CPI)., the yield was at 4.726%
- 5-year yield 4.620%, +0.8 basis points. At this time yesterday, the yield was at 4.358%
- 10-year yield 4.568%, +0.8 basis points. At this time yesterday, the yield was at 4.346%
- 30-year yield 4.655%, +2.2 basis points. At this time yesterday, the yield was at 4.44%
Looking at the treasury yield curve spreads:
- The 2-10 year spread is at -41.0 basis points. At this time Friday, the spread was at -38.2 basis points
- The 2-30 year spread is at -32.4 basis points. At this time Friday, the spread was at -24.4 basis points
European benchmark yields are higher:
