Rising US inflation fails to boost dollar, treasury yields


Aussie, Weak Kiwi; Yuan extends advance, fixed EUR

Summary: the US PCE Core Price Index, considered a favorite inflation measure by the Fed, up 0.7% in April, from 0.4% in March and greater than median forecast of 0.6%. On a annual based, basic price inflation (which excludes food and fuel price), pink 3.1% (Fed target 2%), and the largest annual gain since 1992. However, market reaction showed that the participants are comfortable with indications of acceleration of US inflation. The reference Ten-year US Treasury yield finished at 1.59% of 1.60%. Other rival global bond yields were mostly unchanged. After having made initial gains in the first exchanges, the Dollar index (USD / DXY) who measures the The greenback value against a basket of rival currencies, closed little changed at 90.05 (89.97 Friday). The euro installed at 1.2192 (1.2197 Friday) while Sterling finished at 1.4192 of 1.4201, the two currencies have changed little. the Australian dollar finished like the worst performing currency, down 0.49% at 0.7710 (0.7745 Friday. The other currency linked to the commodities of the Antipodes, the Kiwi (NZD / USD) installed at 0.7247 of 0.7296. USD / CAD sharp up 1.2075 (1.2065). Against the Japanese yen, the Dollar changed hands to 109.85 at NY closure (109.80 Friday). From China Offshore Yuan extended his advanced against the US dollar despite a warning from an elder Chinese central bank official. USD / CNH closed At New York at 6.3605 of 6.3735 Friday. In an interview with the Chinese state media race Xinhua News yesterday an elder central bank official Sheng Songcheng said the current rapid appreciation against the american dollar can I have exceeded.
Wall Street stocks
dive at the close of trade before the long weekend Memorial Day public holiday (today May 31) in the WE. the Dow close at 34,567 (34,572) while the S&P 500 installed at 4,207, down 0.16% (4,212).
Other data released Friday – Unemployment rate in Japan in May went to 2.8% of 2.6%. German import prices climb 1.4%, beat estimates of 1.0% but lower than the previous one 1.8%. the we Merchandise trade balance in April showed a fall in the Deficit at -85.2 billion USD, from a previous –92.0 billion USD. Personal income in the United States in May was at -13.1%, exceeding the median forecast at -14.2%. Chicago PMI Pink to 75.2 of 72.1, improve expectations at 67.9.

  • EUR / USD – The euro first slipped to an overnight low of 1.21326 at the start of trading following the release of the US PCE inflation report. Other US economic reports were mixed and saw the single currency rally close at 1.2190, near its overnight high, but little change from Friday’s 1.2197.
  • GBP / USD – The British pound, like the euro, plunged to 1.41361 overnight low before climbing back towards trade close to 1.4190, from 1.4200 early Friday. The pound, like the euro, closed near its overnight peak (1.42056).
  • AUD / USD – The Aussie lost ground to the greenback and other major currencies in another lackluster performance. AUD / USD was last at 0.7710 after dropping to an overnight low of 0.7677. The Australian RBA has its monetary policy meeting tomorrow where policymakers are expected to maintain an accommodative stance.
  • USD / CNH – slide and slide away. Despite a warning from a former Chinese central bank official, the Chinese offshore yuan extended its impressive lead against the greenback. USD / CNH slipped to overnight and mid-2018 low at 6.35544 before settling at 6.3600. All eyes are on the news feeds today with the option of officially continuing the jawboning of China Inc. Chinese PMI data is released later today (see below).

On the lookout: Month-end factors and public holidays in the US and UK will cause the market to slow down today. However, the coming week will be busy in terms of data and risk events that will culminate on Friday with the US May Payrolls report. The RBA meets tomorrow on interest rates. On Wednesday, the US ISM Manufacturing PMI reports and Canadian (m / m) and Australian (q / q) GDP. RBA Deputy Governor Guy Debelle speaks on Wednesday evening (Sydney 7 p.m.). Thursday will see Australian Retail Sales (May) and US ADP Payrolls, Weekly Unemployment Claims and US ISM Services PMI Reports. ECB President Christine Lagarde and U.S. Fed Chairman Jerome Powell speak on Friday at a global virtual conference as well as payroll reports in Canada and the United States.
Today, Japanese retail sales (May) (f / c 15.3% vs. 5.2%), industrial production (f / c 3.5% vs. 3.4% previous), housing starts in April (y / y forecast 3.5% vs. 1.5%) and Confidence (f / c 33.2 from 345.7). China releases its May manufacturing and non-manufacturing PMIs. New Zealand sees its ANZ Final Business Confidence (f / c +7.0 from +7.0). Credit to the Australian private sector follows (forecast 0.4% year-on-year vs. 0.4%). Europe starts off with Germany’s preliminary CPI (f / c 0.3% vs. 0.7%. Finally, Canada publishes its current account for the first quarter (f / c + CAD 2.4 billion vs. – CAD 7.26 billion) on vacation.

Commercial perspective: Persistent signals of accelerating US inflation have failed to lift US bond yields and the dollar. Without higher interest rate support, the US dollar will struggle to sustain a decent recovery. Asian markets will focus today on this morning’s publication of Chinese manufacturing and non-manufacturing PMIs (11 am, Sydney). There are no further primary economic reports expected today and financial markets will be closed in the UK (Spring Bank Holiday) and the US (Memorial Day Holiday). It’s a busy week in terms of data and events, however, culminating in the US employment report for May. Which is essential for the greenback. Expectations are for a gain in the wage bill (+650k from April +266k Finlogix). We still have a long way to go until then. Today should see consolidation with the dollar holding most of the gains over the weekend.

  • EUR / USD – the euro managed to break out of its overnight lows at 1.21326 and close at 1.2190, which has hardly changed since Friday’s opening. The euro opens early in Asia at 1.2194. EUR / USD has immediate resistance at 1.2200 followed by 1.2230. Immediate support can be found at 1.2160 and 1.2130. End of month factors will dictate any EUR / USD trade and with speculators still long on the single currency the risk is lower compared to current levels.
  • AUD / USD – The Australian Battler extended its lower grind to close at 0.7710 from 0.7745 on Friday. AUD / USD crashed early in US trade to an overnight low and early April to 0.76771. The Aussie has that soggy feel at current levels. However, this could be misleading. The RBA is expected to maintain its accommodative stance at its policy meeting tomorrow. It remains to be seen. Meanwhile, immediate resistance stands at 0.7725 and 0.7750. Immediate support can be found at 0.7670 and 0.7640. Look to trade a likely range of 0.7685 to 0.7755 today. Just swap the shag range on this one for now.
  • GBP / USD – The British Pound ended at 1.4190 at the New York close after the 1.4201 opened on Friday. The British pound traded in a range of 1.4136-1.4206 overnight, closing near its highs. GBP / USD has immediate resistance at 1.4205 followed by 1.4235. Immediate support can be found at 1.4160 and 1.4130. Sterling seems to have slowed his momentum. Unless the US dollar can strengthen, and this would only be due to higher yields, the pound will continue to trade recent ranges. For today looking at a probable 1.4150-1.4230.
  • USD / CNH – After closing at 6.3600 in New York, Asia sees a higher peak in USD / CNH, which is currently trading at 6.3680. Former Chinese central bank official Sheng Songcheng’s weekend comments may have just made an offer under the US dollar. And stopped the advance of the Yuan for the time being. This last “verbal” intervention will not be the only one (as history has taught us) and we can expect further “official” warnings of the strength of the Yuan from current levels. However, we would need a global rebound in the US dollar to really see the USD / CNH short tight. Chinese data released today could see more fireworks in this currency pair. Immediate support likes at 6.3550 (overnight low 6.35554) while immediate resistance can be found at 6.3730 and 6.3830. Prefer to buy USD / CNH dips with probable trade today at 6.3600-6.3850.

Have a good week everyone, have a good negotiation.

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