• US April PCE core inflation 4.7% vs 4.6% expected
• US April durable goods orders 1.1% versus -1.0% expected
• US advance good trade balance $-96.77 billion versus $-85.7 billion expected
• US April wholesale inventories -0.2% vs +0.0% expected
• Fed’s Mester: Fed has made slow progress on inflation. It’s concerning
• Republican House negotiator says ‚major issues‘ still not worked out on debt ceiling
• Atlanta Fed GDPNow tumbles to 1.9%
• ECB’s Makhlouf: Haven’t seen wage settlements that raise concerns on a eurozone level
• Dallas Fed April trimmed mean PCE price index +4.4% vs +3.8% prior
• Canadian government fiscal year deficit cut in half
• Goldman Sachs and BofA see a ‚close call‘ on June Fed but market now sees 70% hike odds
• Euro longs retreat in the latest week of CFTC data
• Baker Hughes total rig count down -9 in the current week
• IMF sees US growth at 1.7% this year and 1.0% in 2024
• IMF raises Italy’s 2023 GDP forecast to 1.1% from 0.7%

Markets:

• WTI crude oil up 96-cents to $72.79
• Gold up $6 to $1946
• US 10-year yields flat at 3.81%
• S&P 500 up 1.4%
• GBP leads, JPY lags

The odds of a June Fed hike have risen to 70% from 50% today and that tells the story in FX, with the dollar gaining, though not exactly in a straightforward way. Both the pricing numbers and the consumption numbers were hot in the PCE data and the big winner was USD/JPY, which hit a new high for the year.

Initially it was a broad USD rally but it was more back-and-forth later as the market also weighed the stronger economic prospects. Flows into US tech are also a seemingly-unstoppable force as well, with the Nasdaq gaining another 2.2% on the AI boom.

The pound managed to hold off the US dollar but fell 90 pips from its highs before bouncing late.

Monday is a holiday in the US so there was some position squaring into the weekend, particularly in bonds as longs didn’t want to be caught offside on a debt ceiling deal and a wave of Treasury issuance. Yellen pushed back the deadline to at least June 5, so the charade may go on for another week.

The bigger story though is that the dollar appears to be breaking out on a number of fronts and there’s no US weakness yet in the data. Will next Friday’s non-farm payrolls report change that? Tune in to find out.

Have a good (long) weekend.

For those in the UK and US.

This article was written by Eamonn Sheridan at www.forexlive.com.

Treasury Secretary Janet Yellen has conjured a few extra days for US politicians to grandstand. She now says that extraordinary measures won’t be exhausted until at least June 5.

House Republican leader McCarthy has said his deadline is June 1 but you can never trust a politician.

In any case, a deal will get done and the US won’t default, the same as always. I think the market has already moved on.

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

There were non-stop flows into US stock markets on Friday, led by the Nasdaq:

• S&P 500 +1.3%
• Nasdaq Comp +2.2%
• DJIA +1.0%
• Russell 2000 +1.1%
• Toronto TSX Comp +0.8%

On the week:

• S&P 500 +0.3%
• Nasdaq Comp +2.4%
• Russell 2000 flat
• Toronto TSX Comp -2.1%

Broadcom was a big winner on Friday, gaining 11% with Qualcom and Intel making some headway as the chip rally broadens out.

This is the fifth week in a row of gains for the Nasdaq and it’s very much looking like the double bottom in Oct/Dec was the low.

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

The speculative market remains far too long euros but pared back the position in the latest week of CFTC data, in what might be a sign of what’s to come.

the EUR’s net speculative long positioning witnessed a significant decrease, dropping to 173,736 contracts compared to 187,089 in the previous week. As investors appeared to cut their bullish bets, the shift suggests some caution may be seeping into the market sentiment regarding the euro’s performance.

The Japanese yen experienced a considerable surge in short positions, hitting 80,660, marking a notable increase from the previous 64,791. This indicates a growing bearish outlook among traders on the yen. Similarly, AUD saw a decrease in its short positioning to 49,081, a slight relief from the preceding week’s 54,594.

In contrast, the British pound’s long position fell marginally from 12,593 to 11,589.

The Swiss Franc saw its small short position cut in half to 903 from the previous week’s 1,859, signalling a potential shift in traders‘ sentiment towards a less bearish outlook.

In net week’s data, I would expect to see more signs of US dollar buying as the dollar surged, inflation rose and the debt ceiling fiasco neared a conclusion. Given the size of the euro net position, it’s particularly vulnerable.

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

Higher interest rates aren’t yet hitting the consumer hard or bringing inflation back to target, according to today’s April PCE report. Inflation rose 4.4% y/y in an acceleration from 4.2% previously while personal spending surged 0.8% in the month.

Bank of America has reaffirmed its base case expectation that the Federal Reserve will not implement a rate hike in June, though the bank maintains an inclination towards a hike in the future, noting that it’s a „close call“.

According to BofA, three conditions need to be met for a Fed rate hike: 1) strong economic data, 2) an increase in the debt ceiling, and 3) subdued regional bank stress.

The bank also believes that inflation remains too persistent for the Fed to commit to a prolonged pause in rate increases. Even if the Fed decides to forego a rate increase in June, BofA suggests that it will keep the possibility of a July hike on the table.

Separately, Goldman Sachs economists continue to chase their tails. After calling for a pause after the March bank stress and then seeing a hike anyway, they’re now teetering with their June call.

„While we continue to expect the Fed to pause deletion in June, this morning’s stronger-than-expected consumer spending and inflation data and the wide range of views by FOMC participants on the appropriate policy path make this a close call,“ Goldman Sachs economists wrote today.

The market is pricing in a 70% chance of a hike in June and a 100% chance of a hike in either June or July.

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

Headlines:

• US futures nudge a little higher on the day
• Dollar continues to sit a little lower in quiet trading
• ECB’s Lane: Food inflation will reverse later this year
• ECB’s Lane: No sense of certainty on terminal rate
• ECB’s Vujčić: Inflation momentum is still persistent
• UK April retail sales +0.5% vs +0.3% m/m expected
• France May consumer confidence 83 vs 84 expected

Markets:

• GBP leads, USD lags on the day
• European equities a little higher; S&P 500 futures up 0.2%
• US 10-year yields down 2.6 bps to 3.788%
• Gold up 0.6% to $1,952.39
• WTI crude up 0.9% to $72.48
• Bitcoin down 0.1% to $26,450

It was a quiet session for the most part as there wasn’t any key headlines in Europe. In terms of data, we saw UK retail sales come in slightly better in April but after a softer revision to the March numbers.

But the story of the day is a retracement in dollar gains as the risk mood holds up ahead of the long weekend. US debt ceiling talks look to be making progress and that is helping to see US futures climb after a bit more of a cautious and tentative start.

The dollar tracked lower in European morning trade and continued that throughout the session, with the pound and antipodeans benefiting the most. GBP/USD is up 0.5% to 1.2380 while AUD/USD is up 0.5% to 0.6538 after a test of 0.6500 earlier in the day.

Elsewhere, USD/JPY is down slightly to 139.75 after a rejection at 140.00 with lower bond yields also placing a drag on the pair. EUR/USD is up just a touch by 0.2% to 1.0745 and USD/CAD down 0.2% to 1.3605 on the day.

It’s now over to US PCE price data to see what that has to offer, before markets start to gear towards the long weekend and then month-end trading next week.

This article was written by Justin Low at www.forexlive.com.

Well, the calls are coming in now after the UK inflation data this week. In case you missed it:

• Markets move to price in an additional rate hike by the BOE after UK CPI data

This article was written by Justin Low at www.forexlive.com.

• Biden expects Congress to raise the debt ceiling

Well, it’s not done until it is done but then again, this has been an issue that almost always runs down to the wire over the last few decades. I definitely thought there might be more drama for markets and a better potential opportunity to fade the panic, but we’ll see.

This article was written by Justin Low at www.forexlive.com.

Dow futures are also seen up 0.1% and Nasdaq futures up 0.3% at the moment as we start to see light gains on the session now. In trading yesterday, there was a heavy contrast in the mood in Wall Street. The Dow suffered losses once again while the Nasdaq surged higher as it owed much to Nvidia’s strong performance after its solid earnings report.

In the bigger picture, overall sentiment looks to be hinging quite a bit on the US debt ceiling talks at the moment.

Tech stocks though have continued to defy the odds, so that might make things a bit tricky as we look towards the long weekend. But at least for now, there are murmurs that debt ceiling talks might take a more optimistic turn (not too surprising) and that is also perhaps helping to see some mild positivity creep in ahead of US trading later.

This article was written by Justin Low at www.forexlive.com.

The dollar is slightly lower on the day but it doesn’t take away from the gains so far this week, as the greenback continues to sit in the driver’s seat ahead of the US PCE price data later. The technical levels outlined yesterday (as per below) are still very much in play and we have to see if dollar bulls have the appetite to chase any breaks before the long weekend.

Elsewhere, Treasury yields are also just slightly lower on the day with 10-year yields down 2.8 bps to 3.786% at the moment. Meanwhile, equities are keeping steadier with S&P 500 futures now up 0.1% after a more tentative start. European stocks on the other hand have seen the early advance wiped out to be little changed now.

US debt ceiling talks are still clouding markets for the most part, at least in terms of equities sentiment that is. However, there are growing murmurs of positive developments and so we have to see if that will keep up ahead of the X-date – which I would estimate is some time during the first week of June.

Anyway, here are the levels to watch for in dollar pairs as highlighted yesterday and are still applicable now:

• EUR/USD at two month-lows as sellers hold their nerve
• USD/JPY continues to look poised in hunt towards 140.00 mark
• GBP/USD starts to get dragged back into the mud again
• USD/CAD buyers hopeful on latest upside break
• AUD/USD looks towards 0.6500 again in latest downside break
• NZD/USD looks for downside break in fall to lowest levels this year

This article was written by Justin Low at www.forexlive.com.