• UMich final 5-year inflation expectations 3.1% vs 3.3% prelim
• US May new home sales 696K vs 588K expected
• Fed’s Daly: We don’t need to think about the end-point for the balance sheet yet
• Fed’s Daly: We want to bring down inflation without crippling growth
• Baker Hughes US oil rig count 594 vs 584 prior
• ECB’s Centeno: Flexible PEPP reinvestments are a powerful tool
• US Supreme Court overturns Roe V. Wade
• BOE’s Pill: Elevated UK inflation stems largely from external shocks
• Belgian June business sentiment -1.8 vs +1.8 prior
• ECB’s De Guindos: Economy losing momentum according to PMIs

Markets:

• S&P 500 up 115 points, or 3.0%, to 3914
• US 10-year yields up 6.8 bps to 3.14%
• WTI crude oil up $2.79 to $107.66
• Gold up $4 to $1826
• AUD leads, JPY lags

After hiking by 75 basis points instead of the 50 bps he long-ascribed to, Powell cited the jump in inflation expectations in the UMich consumer sentiment survey as a factor. Well, he might have waited until the final data was out, as the numbers were lowered.

The market jumped on that and the odds of just a 50 bps hike in July roughly doubled to 27%. That sentiment weighed on the US dollar and boosted stocks as well with some particularly large moves in the commodity currencies.

CAD was doubly boosted by a rebound in oil that left crude down just $2 on the week — a far cry from the mid-week crash. After touching 1.3000 in Asia, USD/CAD finished on the lows at 1.2880.

AUD/USD was similarly strong and found some breathing room above the double bottom 0.6833 in a climb to 0.6937.

The growing problem is the push-and-pull in bonds. The better tone on risk assets took 10-year yields from a low of 3.03% to 3.14%, with less worry about a recession starting to mean a shift back to worries about inflation. That’s a tenuous dynamic that leaves a narrow window for an extension of this price action.

The US dollar was broadly weak but made some progress against the yen.

Curiously, the pound was able to find few bids despite the positive risk tone. Some of that relates back to worries about growth in the eurozone. For its part, the euro managed to climb 30 pips on the session.

Have a great weekend.

This article was written by Adam Button at www.forexlive.com.

On the day:

• S&P 500 3.0%
• Nasdaq +3.2%
• Russell 2000+3.0%
• DJIA +2.6%

On the week:

• S&P 500 +6.4%
• Nasdaq +7.5%
• DJIA +5.4%

Last week was the worst one for US stocks since March 2020 but this week all those declines were wiped out.

This article was written by Adam Button at www.forexlive.com.