Speculation concerning a potential rate hike pause by the Fed in June gains strength following supportive comments by the Fed’s Harker.
- It is widely expected that the Federal Reserve will raise rates again by 0.25% at its next meeting in June, but there is now growing speculation the Fed might decide to pause hikes due to comments from Fed member Harker and stronger than expected US JOLTS Job Openings data which showed 10.1 million when only 9.41 million was expected. Harker stated that the “economy keeps chugging along” and that “the Fed doesn’t have to raise rates at every meeting.” Despite this, US Treasury yields, and the US Dollar, are continuing to rise.
- Stock markets in the Asia Pacific region had their best day in a month following the release of unexpectedly strong Chinese factory data. This also boosted the Australian Dollar.
- The US debt limit deal has passed the House of Congress and will now go to the Senate for ratification – there is no expectation of any problem with its final passage there.
- German Preliminary CPI data released yesterday showed a month on month decline of 0.1%, beating expectations of a rise of 0.2%. This might weaken the Euro further as it weakens the case for rate hikes.
- Canadian GDP data released yesterday was slightly better than expected, being unchanged month on month when a decline of 0.1% was forecasted.
- In the Forex market, the US Dollar is rising again, against its long-term bearish trend. Action has been dominated so far today by weakness in the New Zealand Dollar and strength in the Australian Dollar. However, trend traders will probably still be looking for long trades in the USD/JPY currency pair which recently reached a new 6-month high price while short NZD/USD will also be attractive. The Kiwi remains weak after the RBNZ last week signalled that its terminal rate had been reached in a surprise move.
- There will be several important data releases later today:
- CPI Flash estimate Eurozone expects a decline from 7% to 6.3%.
- US ADP non-farm employment change forecast expecting 173k.
- US Unemployment claims expecting 236k new claims.
- US ISM Manufacturing PMI