Daily Broad Market Recap – May 22, 2024

Foreign exchange rate fluctuations increase with the release of high-level economic reports from major economies!

Meanwhile, minutes from the Fed's May meeting supported a “higher for longer” interest rate environment in the US and supported the US dollar against some of its usual asset counterparts.

We have details on the biggest drivers on the market today!

Titles:

• Reserve Bank of New Zealand He offered a “tight hold” with interest rate hike talks and rising inflation expectations
• Annual UK Consumer Price Index It fell from 3.2% y/y to a three-year low of 2.3% y/y in April (versus expectations of 2.1%); Core CPI fell from 4.2% y/y to 3.9% y/y (versus expectations of 3.6%)
• UK Producer Price Index Inputs for April: 0.6% mo (3.6% expected, -0.2% previous); PPI output was 0.2% (0.4% expected, 0.2% previous)
• German Central Bank He said GDP would “likely rise slightly again” in the second quarter of 2024 after a 0.2% rise in the first quarter.
• Existing home sales in the United States For April it was down 1.9% at 4.14 million (vs. 4.21 million expected, 4.22 million previously)
• US crude oil inventories released by the Energy Information Administration Rose by 1.8 million barrels in the week ending May 17 (vs. -2.4 million expected, -2.5 million previously)
• May Federal Open Market Committee meeting minutes He highlighted members' concerns about continued high inflation
• Government of the Reserve Bank of New Zealand Orr He downplayed expectations of interest rate hikes, saying they would only be “meaningful” if inflation expectations rose uncontrollably due to actual inflation.
• Retail sales in New Zealand For Q1 2024: 0.5% QoQ (-0.3% expected, -1.8% previously); Core retail sales rose 0.4% QoQ (0.0% expected, -1.6% previous)
• Australian Judo Bank Manufacturing PMI It jumped from 48.6 to its highest level in eight months at 48.9; The services PMI fell from 53.1 to a three-month low of 53.6 in May

Broad market price movement:

Major financial assets traded in ranges during the Asian session as traders waited for high-level economic data due later in the day.

One of the most notable events was the Reserve Bank of New Zealand's decision to hold interest rates steady at 5.50% but also raise its bets on the interest rate “peak” and delay its first rate cut forecast.

Volatility began to rise at the start of the London trading session when US 10-year bond yields rose and crude oil prices took potential hits in anticipation of potentially hawkish FOMC minutes.

A hot UK CPI report may also have helped push government bond yields higher as traders trimmed their bets on a rate cut from the Bank of England.

Things turned around briefly after weaker-than-expected US existing home sales data. Fortunately for US dollar bulls, the tight FOMC minutes quickly sent US bond yields and the US dollar higher while weighing on peers such as spot gold, crude oil, bitcoin and US stocks.

Forex market behavior: US dollar against major currencies

Overlay of the US dollar against major currencies Chart by TradingView

It was a busy day for dollar traders, who took into account the 'hold tight' decision made by the Reserve Bank of New Zealand during the Asian session and the hot inflation report in the UK during the London session.

Price action took a more lively turn when minutes from the Fed's May meeting showed that FOMC members expected it would take longer than previously expected to be confident that inflation was slowing enough to reach their 2% target.

Even the strength of the dollar was not able to push the US dollar into the green territory against intraday winners such as the British pound and the New Zealand dollar but the dollar managed to maintain its gains against its other major counterparts.

Potential catalysts coming on the economic calendar:

• French Manufacturing and Services PMI at 7:15 AM GMT
• The German Manufacturing and Services PMI will be announced at 7:30 AM GMT
• The Eurozone Manufacturing and Services PMI will be announced at 8:00 AM GMT
• The UK Manufacturing and Services PMI is released at 8:30 AM GMT
• Initial US unemployment claims at 12:30 PM GMT
• Leading Chinese CB Index at 1:00 PM GMT
• US Manufacturing and Services PMI is released at 1:45 PM GMT
• US New Home Sales at 2:00 PM GMT
• FOMC voting member Rafael Bostic will deliver a speech at 7:00 p.m. GMT
• New Zealand Trade Balance at 10:45pm GMT
• Japan's national core CPI at 11:30 PM GMT

It's World Purchasing Managers' Index (PMI) Day today! Early indicators of trading activity trends around the world may influence market risk sentiment or at least its individual currencies. Meanwhile, Japan's inflation report could move JPY pairs after days of weakness.

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