Daily Broad Market Recap – May 30, 2024

Revised US economic growth data sent the US dollar and other major financial assets all over the charts yesterday!

What exactly do market players need?

We have a list of yesterday's most important headlines:

Titles:

• Rafael Bostic, a voting member of the Federal Open Market Committee, expects the Fed to be prepared to cut interest rates near the end of the year in the fourth quarter of 2024.
• Swiss Central Bank President Thomas Jordaens said:Small upside risks to inflation expectations“Linked to the weaker Swiss franc
• Capital spending in Australia rose another 1.0% quarter-on-quarter in Q1 2024 after a 0.9% increase in Q4 2023 (0.6% expected)
• New Zealand's 2024 budget statement sees interest rates “gradually declining from late 2024” and expects a return to budget surplus by 2027-28, a year later than previously expected.
• The Swiss economy – adjusted for major sporting events – grew by 0.5% on a quarterly basis in the first quarter of 2024 (vs. 0.3% previously expected) and represents the fastest growth since the second quarter of 2022.
• Eurozone unemployment rate fell from 6.5% to 6.4% (vs. 6.5% expected) in April
• The second (preliminary) reading of US GDP showed a revision from 1.6% on a quarterly basis to 1.3% on a quarterly basis (versus 1.2% expected) in the first quarter of 2024; The price index slowed from 3.1% QoQ to 3.0% QoQ (vs. 3.1% expected)
• Initial unemployment claims in the US rose from 216,000 to 219,000 (vs. 218,000 expected) in the week ending May 25.
• The US goods trade deficit widened from $92.3 billion to $99.4 billion – the largest since May 2022 – in April as imports (3.1% m/m) outpaced exports (0.5% m/m)
• Pending home sales in the US fell 7.7% month-on-month in April – the slowest pace since April 2020 – versus an expected 1.1% decline and 3.6% rise in March.
• EIA crude oil inventories showed a decline of 4.2 million barrels in the week ending May 24 (vs. -1.6 million expected, 1.8 million previously)
• John Williams, a voting member of the Federal Open Market Committee, said the Fed has “time and capacity” to collect more data while the United States is on a “reasonably good path” to taming inflation without an economic slowdown.
• Tokyo Core CPI for May: 1.9% m/m as expected (vs. 1.6% previously)

Broad market price movement:

Volatility was relatively tight during the Asian trading session even as lower major assets extended price action from the US trading session on Wednesday.

Gold and crude oil traded lower as traders priced in a “higher for longer” interest rate environment in the US and its impact on global demand, while US 10-year Treasury yields extended their downward pullback from their intra-week highs of 4.63%.

Fortunately for gold fans, spot gold turned bullish at the start of the European session when traders first moved away from “risky” bets ahead of US data releases and then again during the US session when it served as a counterpart to the weak US dollar. . Bitcoin (BTC/USD) was also a winner, finding support from the weekly lows of 67,150 to reach the $68,400 area before pulling back again.

Weaker-than-expected mid-level reports from the US have cast doubt on Uncle Sam's growth resilience and encouraged concerns about growth and bets on interest rate cuts at the same time.

US oil prices fell sharply on demand concerns, while US 10-year bond yields continued to decline and the US dollar index capped the day in red.

Forex market behavior: US dollar against major currencies

Overlay of the US dollar against major currencies Chart by TradingView

The US dollar began to lose strength during the late Asian session and early European session as traders began to unwind their bets on the US dollar ahead of the release of US data on Thursday.

Downward revisions to the GDP and GDP price indexes for the first quarter of 2024, as well as weaker-than-expected numbers from initial jobless claims and pending home sales data, accelerated the dollar's losses during the US session.

The US dollar eventually traded within ranges and saw minimal pullbacks before ending the day lower against its major counterparts. The dollar is weaker against the Swiss franc after a better-than-expected Swiss GDP release, while it is seeing few losses against “risky” bets such as the New Zealand dollar, British pound and Australian dollar.

Potential catalysts coming on the economic calendar:

• China Manufacturing and Services PMI at 1:30 AM GMT
• Housing in Japan begins at 5:00 AM GMT
• German retail sales at 6:00 am GMT
• UK national house price index at 6:30am GMT
• CPI and preliminary GDP for France at 6:45 AM GMT
• UK mortgage approvals at 8:30am GMT
• Preliminary Eurozone CPI estimate at 9:00 AM GMT
• Canada's monthly GDP at 12:30 PM GMT
• Core US PCE price index at 12:30pm GMT
• US Chicago Purchasing Managers' Index (PMI) at 1:45 pm GMT

Markets' attention may turn to the Eurozone today with inflation updates from the region and German retail sales data due to be released.

Once again, volatility may be limited ahead of the expected US core PCE report, which is expected to maintain its monthly reading but also show a slight downward revision to the annual figure.

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