US MBA mortgage applications w.e. 3 June -6.5% vs -2.3% prior 0 (0)

Prior -2.3%Market index 288.4 vs 308.3 priorPurchase index 208.2 vs 224.1 priorRefinancing index 709.5 vs 751.6 prior30-year mortgage rate 5.40% vs 5.33% priorThe awful readings continue with the market index tumbling to a fresh 22-year low, suggesting that the housing market is cooling amid the rise in rates. The question now is how will all this feed into house prices, which have yet to significantly come off the boil. And if it does, what exactly does that say about the state of the US economy in general?

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Euro steadies itself with ECB in focus tomorrow 0 (0)

The euro is showing some bit part resilience on the day as it regains some ground after following other major currencies lower against the dollar earlier. It is now the best performer on the day with a focus on the ECB tomorrow. The technical picture shows a bit more of a consolidation in EUR/USD price action in the past two weeks:

Despite the dollar being firmer today, the euro is the exception as markets continue to aggressively price in ECB rate hikes. As things stand, money markets have priced in odds of 75 bps worth of rate hikes by September as compared to the 70 bps on Friday. Meanwhile, odds of a 50 bps rate hike in July is pretty much a coin flip.A lot will depend on the ECB language tomorrow to determine how aggressive or justified the market pricing currently is.I’m on the camp that markets have gone a little too far in pricing ECB hawkishness, especially considering the economic headwinds.It’s a tough one for policymakers when they are getting so little help from lawmakers in the inflation battle but rate hikes aren’t the solution. We’ve known that for a while already and so does Lagarde & co. surely.Anyway, the euro is pretty much waiting in line for a fresh catalyst to break on either side against the dollar. The ECB might offer some clues tomorrow, so keep your eyes and ears peeled for that.

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Eurozone Q1 final GDP +0.6% vs +0.3% q/q second estimate 0 (0)

GDP +5.4% vs +5.1% y/y second estimateThe upwards revision may look positive at first glance but the details are less rosy. The better-than-estimated growth in Q1 was largely driven by a rise in exports (+0.4%) and stocks (+0.6%), offsetting the drop in government expenditure (-0.1%) and household consumption (-0.3%). The material impact from the Russia-Ukraine conflict is more likely to be felt in Q2, so just be wary of that.

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Dollar gains in European morning trade 0 (0)

The dollar is keeping resilient as another push higher in USD/JPY is sparking flows into the currency today. The pair looks poised to march towards 135.00 and is up almost 120 pips today to 113.75 at the moment. The mood is helped by a rise in bond yields, with 10-year Treasury yield seen up 4 bps to 3.01%.
Elsewhere, the greenback is also posting modest gains with the sluggish risk mood seeing the aussie and kiwi punished the most.
EUR/USD is down 0.2% to 1.0675 as the push and pull continues ahead of the ECB. Meanwhile, GBP/USD as backed off the highs near 1.2600 to fall towards 1.2520 levels at the moment. The daily support levels below will be ones to watch:

That being the 38.2 Fib retracement level at 1.2471 and the 1 June low at 1.2458. Those are key levels to watch on the daily close to see if sellers have the appetite to go chasing for the next leg lower.
Besides that, AUD/USD is down another 0.6% to 0.7180 upon a rejection of its 100-day moving average:

Sellers are wrestling back for near-term control below the 200-hour moving average at 0.7194 but the minor support region around 0.7145-60 will be one to watch to see if the downside momentum will extend further.The more sluggish tones in the aussie and kiwi aren’t helped by the softer risk mood with European indices posting slight losses now with US futures also still pointing lower. S&P 500 futures are down 0.3% still at the moment.

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UK May construction PMI 56.4 vs 56.6 expected 5 (1)

Prior 58.2

That’s the softest reading since January as the weakest rise in residential work for two years holds back construction activity last month. Companies mentioned that rising borrowing costs and heightened economic uncertainty were all likely to act as headwinds to client demand in the next 12 months. S&P Global notes that:
„May data signalled a solid overall rise in UK construction output as resilience across the commercial and civil engineering segments helped to offset weakness in house building. Residential construction activity was close to stagnation in May, which represented its worst performance for two years amid signs of softer demand and a headwind from low consumer confidence.
„New order volumes expanded at the slowest pace since the end of 2021, which added to signs that heightened economic uncertainty has started to impact client spending. Concerns about the business outlook were signalled by a fall in construction sector growth projections to the lowest for more than one-and-a-half years in May. Around 19% of construction firms predict an outright decline in business activity during the year ahead, up from just 5% at the start of 2022.
„On a more positive note, supplier delays subsided in May, with the latest downturn in performance the least marked since February 2020. Meanwhile, rapid price pressures persisted due to rising energy, fuel and staff costs, but the overall rate of inflation eased to a threemonth low in May.“

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