Daily Broad Market Recap – June 5, 2024

'Risk' assets and their US dollar counterparts saw gains during the US session as more traders priced in a potential interest rate cut by the Federal Reserve.

The US dollar itself was largely stable, shedding points against commodity-linked currencies but also posting gains against other safe havens such as the Japanese yen and Swiss franc.

Titles:

• Australian GDP grew by 0.1% quarter-on-quarter in the first quarter of 2024 versus 0.3% expected and 0.2% previously.
• China Caixin Services PMI for May: 54.0 vs. 52.5 expected and previous; Companies raised their fees amid rising cost burdens; Employment levels expanded for the first time in four months
• HCOB France final services PMI was revised lower from 49.4 to 49.3 in May versus 49.4 expected; The rate of job creation slowed slightly; The inflation rate was at its weakest level since July 2021
• HCOB Germany final services PMI was revised higher from 52.9 to 54.2 versus 53.9 expected; The pace of job creation accelerated to the fastest pace since June; There were less significant price increases for end consumers
• The final Eurozone services PMI (HCOB) was revised down from 53.3 to 53.2 in May versus 53.3 expected; Job creation matched the fastest April rate since June 2023; Sales duty inflation fell to its lowest level in six months
• The final S&P Global Services PMI for the UK maintained at 52.9 as expected in May; Prices rose at the slowest pace in more than three years. Job creation accelerated to the fastest pace since February
• Eurozone producer prices for April: -1.0% m/m vs. -0.6% expected, -0.5% previous
• The change in non-farm payrolls in the United States of America showed an additional 152 thousand net jobs in May compared to 173 thousand expectations and an increase of 183 thousand in April.
• The Bank of Canada cut interest rates by 25 basis points to 4.75% as expected in June and hinted at future rate cuts.
• S&P Global's final US services PMI maintained 54.8 as expected in May; Providers continued to reduce their staffing levels in May; There was a faster increase in selling prices
• US ISM Services PMI for May: 53.8 vs. 51.0 expected, previous 49.4; The employment rate increased from 45.9 to 47.1; The price index fell from 59.2 to 58.1
• EIA: US crude oil inventories rose by 1.2 million barrels in the week ending May 31 versus an expected decline of 2.1 million barrels, and a decline of 4.2 million barrels in the previous week.

Broad market price movement:

Major financial assets were all over the place today, with crude oil and spot gold losing ground during the Asian session due to general risk appetite and a bit of stability for the US dollar.

The tides turned just hours after the European session opened as Eurozone PMIs and mixed (but mostly positive) interest rate cut bets encouraged risk on. Bitcoin (BTC/USD) futures, oil and the S&P 500 index were trading higher while US 10-year bond yields and spot gold were lower.

The failure of the US ADP report during the US session boosted this week's disappointing JOLTS jobs data and the US S&P Manufacturing PMI and increased market bets on a Fed rate cut. The ISM Manufacturing PMI showed strength but also indicated weakness in the employment component.

It didn't help that the Bank of Canada cut interest rates – the first G7 central bank to do so in years – and highlighted the increased likelihood of rate cuts by other central banks.

A pro-rate cut environment dragged US 10-year bond yields below 4.30% and boosted US dollar counterparts such as crude oil, spot gold and US stocks. The S&P 500 and Nasdaq even hit new highs!

Forex market behavior: US dollar against major currencies

Overlay of the US dollar against major currencies Chart by TradingView

The US dollar had a relatively cool day, as it extended gains against other safe havens such as the Japanese yen and Swiss franc during the early Asian and European sessions.

The US dollar received a boost after a better-than-expected Services Purchasing Managers' (ISM) index, but the move was quickly reversed as traders focused on the persistently weak employment component.

The Bank of Canada also cut interest rates, creating a risk-friendly trading environment that sent the safe-haven US dollar lower.

The dollar ended the day not far from its daily opening prices, with gains against the Japanese yen, Swiss franc, Canadian dollar and euro, but also losses against “riskier” bets such as the Australian dollar, New Zealand dollar and British pound.

Potential catalysts coming on the economic calendar:

• Unemployment rate in Switzerland at 5:45 am GMT
• German Factory Orders at 6:00 AM GMT
• Retail sales in Italy at 8:00 am GMT
• UK Construction PMI at 8:30 AM GMT
• Eurozone retail sales at 9:00 AM GMT
• Job cuts at US Challenger at 11:30 AM GMT
• The ECB's policy decision will be issued at 12:15 PM GMT, and will be released at 12:45 PM GMT.
• Initial US unemployment claims at 12:30 PM GMT
• Canada Trade Balance at 12:30 PM GMT
• The US adjusted non-farm productivity and labor costs at 12:30 PM GMT
• US Trade Balance at 12:30 PM GMT
• Canada's IVEY PMI at 2:00 PM GMT
• New Zealand manufacturing sales at 10:45pm GMT
• Japanese household spending at 11:30pm GMT

The European Central Bank is expected to follow the Bank of Canada in cutting interest rates this month. But, according to our Event guide to the ECB decisionThe pressure that will follow may receive more attention from the markets.

Meanwhile, Challenger job cuts and initial jobless claims data from the US may move the needle for the dollar and its usual counterparts as traders reprice their bets on a Fed rate cut.

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