The USD is the strongest and the NZD is the weakest as the NA session begins

The US dollar is the strongest while the New Zealand dollar and the Australian dollar are weaker as the North American session begins.

The US economy continues to show resilience amid fears of a potential recession. Data yesterday showed an unexpected rise in new durable goods orders for major manufactured goods in the US and an increase in new single-family home sales in May. In addition, US consumer confidence rose to its highest level in nearly a year and a half in June. Although the Fed halted rate hikes earlier in the month, it indicated that it may be necessary to raise interest rates twice this year. Positive data led investors to increase the probability of a July rate hike to 77% from 74.4% the day before, indicating a possible increase in the Fed’s rate range to 5.25%-5.50%.

Overnight, the Australian Consumer Price Index (CPI) rose 5.6% in the year to May 2023, compared to 6.8% in the previous month and less than the 6.1% estimate. Fundamental metrics for the month remained above 6% but it was the headline that the market responded to (both AUD and NZD). While the monthly CPI print has caveats, the data doesn’t cover the entire “basket” that quarterly CPIs do for example, and we don’t get the most reliable quarterly data until late July. The Reserve Bank of Australia meets next week, July 4th, and today’s data appears to be enough for the bank to leave the cash rate unchanged at this meeting.

In the United States, the Biden administration is considering new restrictions on the export of artificial intelligence chips to China amid concerns about potential misuse in weapons development and hacking. The move could affect chipmakers such as Nvidia and AMD, which will reportedly require them to obtain licenses before shipping their chips to China. The government is also looking into limiting the rental of cloud services to Chinese AI companies to increase control over access to advanced technology. The report said the halt to shipments by Nvidia and other chip companies to customers in China could come as early as July. Nvidia gets about a fifth of its revenue from China. The decision is in line with the United States’ growing view of artificial intelligence as a matter of national security. Nvidia shares are trading at $406.50, down -2.93% on the day. AMD shares were also lower in pre-market trading at $107.52, down -2.62% on the day.

Today traders will be watching a panel discussion at the European Central Bank’s annual forum in Sintra, Portugal, featuring top central bankers including Federal Reserve Chairman Jerome Powell, European Central Bank President Christine Lagarde, Bank of England and Bank of Japan Governor Kazuo Ueda. Last week, Powell’s hawkish commentary on interest rates halted a rally on Wall Street that sent major indexes to notable highs. Lagarde emphasized the continuation of high inflation, stressing that it would require continued interest rate hikes. The Bank of England raised interest rates by 50 basis points last week. Meanwhile, Japan’s divergent monetary policy led to the yen reaching its lowest level in nearly 15 years against the euro and its lowest level in eight months against the dollar, which raised speculation that Japan might intervene to support its currency, as it did last October, which led to actual drop. The dollar rose from a peak of 151.94 to 144.50 within hours.

The ECB bankers made the following comments in the European session:

• The ECB’s Vasle stated that they need convincing to believe that a rate hike beyond July is not necessary.
• The ECB’s Scicluna comments that decisions regarding post-July rates will be considered at their meeting, while recognizing the importance of being cautious about the impact of rate hikes.
• The ECB’s Vujcic notes that there is no reason to announce September measures now, though he acknowledges the strong possibility of a September rate hike.

Japan’s Finance Minister, Shunichi Suzuki, stated overnight that the exchange rate should ideally be stable. He noticed a unilateral movement in the current market and assured that the government would respond appropriately to any excessive moves if necessary. He did not comment on the specifics of foreign exchange levels. USDJPY trades to a new high for the year (and a high dating back to November) in early US trading.

Overall, US stocks were mixed with the Dow Jones Industrial Average up slightly while the S&P and NASDAQ were down on chip news and in anticipation of the central bank’s speech today. US yields are trending down about 3 basis points across the curve. Crude Oil was little changed after private data showed a drawdown of -2.408 million barrels late yesterday. The forecast was -1.757 million barrels when EAI data was released at 10:30 am. Gasoline Inventories saw a decline of -2.85M barrels vs. forecast of -0.126M on a release later today.

A snapshot of the markets currently showing:

• Crude Oil is trading near unchanged at $67.70
• Spot gold is trading as low as -$6.39 at $1907.26
• Silver decreased by $0.19 at $22.63
• Bitcoin is trading at $30,306 near the start of the American session

In the primary market for US stocks, the major indices are trading mixed in the pre-market trading

• The Dow Industrial Average is trading up 15.26 points, after rising to 212.03 points yesterday. The Dow Jones snapped a 6-day losing streak yesterday
• The S&P is trading down 8.4 points after yesterday’s rise of 49.59 points
• The Nasdaq is trading at -58 points, after rising yesterday at 219.89 points

In European stock markets, major indices are trading higher

• Germany’s DAX rose 0.73%.
• The French CAC rose 0.75%.
• UK’s FTSE 100 index up 0.63%
• Spanish Ibex rose 0.75%
• Italy’s FTSE MIB Index Up 0.57% (Late)

In today’s Asia-Pacific market, Japan and Australia indexes fell. China is closed for a holiday:

• Japan’s Nikkei rose 2.02%
• Australia’s S&P/ASX 200 rose 1.10%
• China’s Shanghai Composite Index rose 1.23%.

In the US debt market yields are marginally lower

• 2 years yield 4.732% -3.1 basis points
• 5-year yield of 4,000% -3.5 basis points
• The 10-year yield is 3.733% -3.5 basis points
• 30-year yield 3.811% -2.8 basis points

In the European debt market, record 10-year yields are below the head of central bankers: