The GBP is ending as the strongest of the major currencies and the EUR is the weakest in what was mostly up and down trading in the forex market today
The GBP is ending as the strongest of the major currencies and the EUR is the weakest in what was mostly up and down trading in the forex market today.
The strongest to the weakest of the major currencies
Trading ranges for the second consecutive day were limited as traders chose to wait for the US CPI which will be release tomorrow at 8:30 AM ET. The expectations for the key release:
- CPI (YoY): +5.0% expected, matching March’s +5.0%
- CPI (MoM): +0.4% expected, up from March’s 0.1%
- Core CPI (YoY): +5.5% expected, slightly lower than March’s +5.6%
- Core CPI (MoM): +0.4% expected, same as March’s +0.4%
The USD was mostly higher with the only decline vs the GBP and that was only by -0.03%. The EURUSD was the biggest mover with the USD higher by 0.38% vs the EUR. The USDJPY for the 2nd day in a row traded in a very narrow range. The low to high trading range was only 64 pips. That is 50% of the normal range over the last month of trading of 127 pips. Technically, the pair spend the day nearly entirely between the 200 hour MA above at 135.426 and the 100 hour MA below at 134.699 (see green and blue lines on the chart below).
In the US stock market today, the major indices all moved lower ahead of the inflation data tomorrow. The Dow is now down 6 of the 7 days of May. The Nasdaq and the S&P are down 5 of 7 days. The catch phase “Sell in May and go away” is ringing true so far.
The final numbers are showing:
- Dow Industrial Average .0 .17%
- S&P index -0.46%
- NASDAQ index by 0.63%
in the US debt market, yields are marginally higher:
- 2 year yield 4.028% +1.6 basis points
- 5 year 3.501% +0.4 basis points
- 10 year yield 3.524% +0.5 basis points
- 30 year yield 3.844% +1.0 basis points
The U.S. Treasury auctioned off $40 billion a 3 year notes today with strong demand from international buyers. The Treasury will auction off a 10 year notes tomorrow and 30 year bonds on Thursday.
Crude oil prices are trading up $0.33 at $73.49 after settling at $73.71. A report that Russia was close to its proposed reduced production levels, goosed the price of oil to the upside in the early US afternoon. The low price reached $71.34. The high price extended to $73.78. The private inventory data released near the close of day showed a surprise build in crude inventories of 3.618 million versus -0.917 million expected
Fundamentally, the IBD/TIPP index tumbled to 41.6 from 47.4 last month. That equated to a a 12.2% decline in economic optimism in May. The index is the 21 consecutive months in negative territory, with readings below 50 indicating pessimism. The Six-Month Outlook component experienced a significant 16.8% drop, reflecting concerns about the economy’s prospects in the coming months. Not good news.
New York Federal Reserve President John Williams spoke today and discussed the impact of interest rate increases on the economy and inflation. He cautioned that it will take time for the FOMC’s actions to influence inflation, stating, “it will take time for the FOMC’s actions to restore balance to the economy and return inflation to our 2% target.” Williams emphasized that the Fed hasn’t stopped raising rates, saying, “We haven’t said we’re done raising rates,” and will assess the economy’s situation based on incoming data. He also mentioned his focus on the banking industry’s current problems and their impact on his policy outlook, stating, “I will be particularly focused on assessing the evolution of credit conditions and their effects on the outlook for growth, employment and inflation.” Williams does not expect the Fed to cut rates in 2023 which runs counter to the markets perspective which sees the Fed funds rate to be 4.42% in January 2024. The Fed funds target is currently in a range between 5% and 5.25%. .
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