How did major assets trade after the US CPI report and Fed decision in June?
We've got details on Thursday's market headlines and price action you need to know!
Titles:
- Australian employment change In May: 39.7K (30.5K expected, 37.4K previous); The unemployment rate fell from 4.1% to 4.0% as expected
- Switzerland Producer Price Index Weakened from 0.6% monthly to -0.3% monthly (0.5% expected) “primarily due to lower prices of pharmaceutical and petroleum products”
- Industrial production in the euro area April fell from a downwardly revised reading of 0.5% m/m to -0.1% m/m in April.
- US Producer Price Index for May: -0.2% m/m (0.1% forecast, 0.5% prior) mainly due to lower energy prices; Core PPI at 0.0% (0.3% expected, 0.5% previous)
- Initial unemployment claims in the United States Rose from 229K to 10-month high of 242K (vs. 225K forecast) in the week ending June 8
- BusinessNZ Manufacturing PMI It contracted faster from 48.8 to 47.2 in May; Recent PMIs “suggest that the second quarter will also be weak and perhaps even weaker than we already expect.”
- New Zealand food price index It slowed from 0.6% mo/m to -0.2% mo/m in May
- Bank of Canada Deputy Governor Sharon Kozicki she said she is “See more signs that fundamental price pressures are easing.“
Broad market price movement:
Dollar Index, Gold, S&P 500, Oil, 10-Year US Yields, Bitcoin Overlay Chart by TradingView
After a volatile US session, major assets saw relatively calmer price action during the Asian session as traders digested US headlines.
However, Bitcoin (BTC/USD) and spot gold prices continued their declines, and did not stop their intraday downward trends until the middle of the US trading session.
US crude oil prices were all over the charts as traders priced in cool US inflation which could lead to a rate cut from the Fed, but also Wednesday's Energy Information Administration report reflecting a build-up in US crude oil inventories and Russia's pledge to meet production quotas. Oil (after admitting it had exceeded quotas in May).
Global stocks were a bit more mixed, with Asian and European stocks seeing further weak demand, while the US S&P 500 and Nasdaq indexes hit new record highs on continued strength in the technology sector.
Forex market behavior: US dollar against major currencies
Overlay of the US dollar against major currencies Chart by TradingView
The US dollar rose pips at the start of the Asian trading session as traders caught the Fed's “hold tight” event.
The dollar lost some of its gains at the start of the European session, possibly due to profit taking, but was soon trading higher as headlines about political uncertainty in Europe and MSCI's rejection of EU bonds from sovereign debt indexes gained momentum.
Later, US dollar sellers rebounded after weaker-than-expected US Producer Price Index numbers confirmed a decline in inflationary pressures reflected in the CPI report. A rise in initial weekly jobless claims to a 10-month high and a fall in 10-year US bond yields to new lows during the week may also be constraining demand for the US dollar.
However, the dollar managed to maintain its gains against all its major counterparts except the Swiss franc.
Potential catalysts coming on the economic calendar:
- The Bank of Japan's monetary policy decision and press conference are scheduled during the Asian session
- Japanese industrial production revised at 4:30 AM GMT
- Final CPI in France at 6:45 am GMT
- Italian Trade Balance at 8:00 AM GMT
- UK consumer inflation forecast at 8:30 am GMT
- Manufacturing sales in Canada at 12:30 PM GMT
- Wholesale sales in Canada at 12:30 pm GMT
- US Preliminary Consumer Confidence and Inflation Expectations from UoM at 2:00 PM GMT
- ECB President Christine Lagarde will deliver a speech at 5:30pm GMT
The Bank of Japan (BOJ) may shake markets with an expected policy decision that could see changes in the bank's bond purchasing plans.
Meanwhile, the release of US inflation forecasts – a report the Fed has cited before – could add drama to Fed rate cut discussions during the US session.
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