Market Watch
Fri Jun 02, 2023
Daily Insight
Americas

U.S. Nonfarm payrolls posted a strong 339k gain in May vs. a 195k estimate. April Nonfarm payrolls were revised higher to 294k (from 253k). Private payrolls were 283k (168k est.), and Manufacturing payrolls were -2k (5k est.). The unemployment rate for May increased to 3.7% from April’s 3.4%.

U.S. Treasury yields have surged in the wake of the employment data, the biggest gain of 0.08% in the 2-year tenor. Fed Fund Futures are pricing in a 0.42% probability of a 0.25% hike at the FOMC’s July policy meeting.

The USD has gained fractionally against the G10 currencies following the surprise employment data. Dollar gains are 0.38% vs. JPY, 0.24% vs. CHF, 0.17% vs. EUR, and 0.14% vs. GBP. Notable dollar losses today include a 0.48% decline vs. MXN and 0.72% drop against the AUD.

Equity markets remain buoyant following the Senate’s approval of the debt-ceiling measure, which is fueling today’s risk-on sentiment. All major equity indexes are trading higher along with other ‘risk’ assets such as the Mexican peso and Bitcoin.

USDMXN is quickly approaching this year’s low at 17.4010 (May 16th) while trading below the 2017 low of 17.4395. Continued peso strength suggests a possible test of next major support at 17.1800.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Fri Jun 02, 2023
06:30 am
USD - Average Hourly Earnings m/m
06:30 am
USD - Unemployment Rate
06:30 am
USD - Non-Farm Employment Change
Market Indicators
HIGH
LOW
USD/JPY
139.4500
138.6100
EUR/USD
1.0779
1.0736
GBP/USD
1.2545
1.2494
USD/CHF
0.9086
0.9035
AUD/USD
0.6638
0.6567
USD/CAD
1.3451
1.3407
DOW
33,344.0000
NASDAQ
14,532.7500
OIL
71.5900
GOLD
1,974.5600
Market Watch
Thu Jun 01, 2023
Daily Insight
Americas

The House passed the new debt-ceiling agreement in after-market hours yesterday. The legislation now goes to the Senate which must approve the government’s borrowing increase before June 5th (estimate) to avoid default.

Fed officials tilted towards a pause in rate hikes at the June 14th meeting in a series of coordinated comments yesterday. Speculation had been ramping up for a 25-basis point increase with the probability of a hike peaking at 69.6% at mid-day yesterday. But by market close the probability of a June increase had dropped to 31.7%.

Progress on the debt-limit and the Fed’s more dovish stance on rates is driving a risk-on move in markets today. U.S. Treasury yields are down in all tenors with the exception of the 1-year which is currently showing a small gain. The USD is lower vs. most G10 and major pairs, the biggest decline a 0.48% drop against the Mexican peso, consistent with increased risk appetite.

ADP Employment Change data released today was 278k, significantly above the 170k estimate. The ADP data is the precursor to tomorrow’s Change in Nonfarm Payrolls, the key reading on labor conditions in the U.S. The strong labor market is a key component of persistently high inflation, and is closely watched by the Fed in its ongoing rate policy.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Thu Jun 01, 2023
06:15 am
USD - ADP Non-Farm Employment Change
06:30 am
USD - Unemployment Claims
08:00 am
USD - ISM Manufacturing Prices
08:00 am
USD - ISM Manufacturing PMI
Fri Jun 02, 2023
06:30 am
USD - Average Hourly Earnings m/m
06:30 am
USD - Unemployment Rate
06:30 am
USD - Non-Farm Employment Change
Market Indicators
HIGH
LOW
USD/JPY
139.9500
138.9700
EUR/USD
1.0715
1.0662
GBP/USD
1.2491
1.2401
USD/CHF
0.9114
0.9075
AUD/USD
0.6533
0.6485
USD/CAD
1.3585
1.3535
DOW
32,871.0000
NASDAQ
14,287.2500
OIL
68.1100
GOLD
1,966.8600
Market Watch
Thu May 25, 2023
Daily Insight
Americas

The Fed’s favorite measure of inflation, Core PCE, was reported today at 5.0% for Q1, above the 4.9% estimate. This is most certainly unwelcome news for the Fed but can’t be much of a surprise given it lines up with the CPI data released on May 10th which also showed no retreat in consumer inflation.

The probability of a rate hike at the FOMC’s July meeting crossed above 50% for the first time today in the current rate hike cycle following the release of Core PCE. Fed Funds Futures are also implying a 43% chance of a hike at the June policy meeting, but a June move has been essentially ruled out in recent comments by Fed officials. So, assuming a debt-ceiling agreement is reached soon, the Fed will likely keep rates unchanged at the June meeting and hike 25-basis points at the July meeting.

U.S. Treasury yields have rallied today, the biggest gain in the 1-year tenor, 0.079%, as treasury prices drop in anticipation of lending rates moving higher.

The U.S. dollar index is 0.26% with the dollar gaining in all G10 and major pairs. The dollar’s widest gains are 0.73%vs. SEK, 0.69% vs. NZD, 0.37% vs. NOK, 0.35% vs. AUD, and 0.28% vs. EUR.

The major equity indexes are a mix of gains and losses, but the Nasdaq 100 is the standout performer today with a gain of 2.31%, taking the lead from tech company Nvidia.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Thu May 25, 2023
06:30 am
USD - Prelim GDP q/q
06:30 am
USD - Prelim GDP Price Index q/q
06:30 am
USD - Unemployment Claims
08:00 am
USD - Pending Home Sales m/m
Fri May 26, 2023
06:30 am
USD - Core Durable Goods Orders m/m
06:30 am
USD - Durable Goods Orders m/m
08:00 am
USD - Revised UoM Consumer Sentiment
Market Indicators
HIGH
LOW
USD/JPY
139.8300
138.8300
EUR/USD
1.0757
1.0712
GBP/USD
1.2387
1.2332
USD/CHF
0.9069
0.9038
AUD/USD
0.6547
0.6510
USD/CAD
1.3626
1.3587
DOW
32,682.0200
NASDAQ
12,635.9600
OIL
72.4900
GOLD
1,947.2300
Market Watch
Wed May 24, 2023
Daily Insight
Americas

Markets are lower today as investors continue the shift to defensive positions. The impasse in the debt-ceiling negotiations becomes more critical by the day and traders are forced to adjust for the potential of a worst-case scenario.

Inflation numbers for the UK were released today, with April CPI reported higher than forecast in every category: monthly CPI was 1.2% vs. 0.7% forecast; and yearly CPI was 8.7% vs. the 8.2% estimate. Combined with hawkish comments from Fed officials this week, global markets are coming to the realization that rates are going to be higher for longer than previously thought.

European equity indexes are trading in negative territory and U.S. equities are set to open lower at the start of trading .

U.S. Treasury yields are split evenly between gains in the 1-month to 5-year tenors and declines in the 6-year to 30-year tenors. The probability of a 0.25% hike at the FOMC’s June and July meetings has increased and the likelihood of cuts at the remaining scheduled meetings through January has declined significantly.

The U.S. dollar index is -0.02% today, but that result masks some significant overnight USD gains and losses: 1.94% vs. NZD, 0.61% vs. AUD, and -1.13% vs. MXN.

The focus of today’s economic data is on the FOMC’s meeting minutes from the May 3rd policy decision.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Wed May 24, 2023
08:05 am
USD - Treasury Sec Yellen Speaks
12:00 pm
USD - FOMC Meeting Minutes
Thu May 25, 2023
06:30 am
USD - Prelim GDP q/q
06:30 am
USD - Prelim GDP Price Index q/q
06:30 am
USD - Unemployment Claims
08:00 am
USD - Pending Home Sales m/m
Fri May 26, 2023
06:30 am
USD - Core PCE Price Index m/m
06:30 am
USD - Core Durable Goods Orders m/m
06:30 am
USD - Durable Goods Orders m/m
08:00 am
USD - Revised UoM Consumer Sentiment
Market Indicators
HIGH
LOW
USD/JPY
138.7700
138.2300
EUR/USD
1.0801
1.0748
GBP/USD
1.2470
1.2364
USD/CHF
0.9037
0.9005
AUD/USD
0.6620
0.6561
USD/CAD
1.3559
1.3496
DOW
33,024.0000
NASDAQ
13,639.5000
OIL
74.1300
GOLD
1,977.0200
Market Watch
Tue May 23, 2023
Daily Insight
Americas

Hawkish comments from Fed officials yesterday came as a surprise to traders, who had filed away the 0.25% increase in the Fed’s policy (overnight) rate on May 3rd as the ‘last hike’. Granted, consumer prices remain elevated. The small tick down in YoY CPI (4.9% vs. the previous 5.0%) reported on May 10th was a disappointment to the Fed and was likely the impetus for new calls for higher rates from Fed policymakers. YoY CPI (year over year consumer price inflation) crossed above 4% in April of 2021 and has remained above since.

The Fed seems chronically in an unenviable position, being second-guessed for responding with rate adjustments that are criticized for being either too fast or too slow. Now add the debt-ceiling crisis to the mix, and the cross currents in forming Fed policy must be mind boggling. Higher borrowing rates translate directly into a higher debt service amount the U.S. government owes on its obligations, adding fuel to the current and future debt-ceiling crises. On the other hand, consumer inflation is becoming entrenched. Ask anyone reliant on a fixed source of income and they will tell you that whatever the recent inflation adjustments have been (if any), they have not been enough to keep up with prices.

The Fed’s Volker era of policy rate adjustments is looking increasingly brilliant in hindsight. A series of tactical outsized rate adjustments of several % shortly followed by equally sized rate cuts were effective at containing inflation.

The U.S. dollar index is 0.28% today and reached a 2-month high overnight at 103.65. Dollar gains vs. the G10 pairs: 0.45% vs. JPY, 0.22% vs. SEK, and 0.06% vs. GBP.

U.S. Treasury prices are down, lifting yields for the third consecutive day.

Equities are mixed with most major indexes trading in the red. Oil is higher by 1.04%. Gold is -0.15%.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Tue May 23, 2023
07:45 am
USD - Flash Manufacturing PMI
07:45 am
USD - Flash Services PMI
08:00 am
USD - New Home Sales
08:00 am
USD - Richmond Manufacturing Index
Wed May 24, 2023
08:05 pm
USD - Treasury Sec Yellen Speaks
12:00 pm
USD - FOMC Meeting Minutes
Thu May 25, 2023
06:30 am
USD - Prelim GDP q/q
06:30 am
USD - Prelim GDP Price Index q/q
06:30 am
USD - Unemployment Claims
08:00 pm
USD - Pending Home Sales m/m
Fri May 26, 2023
06:30 am
USD - Core PCE Price Index m/m
06:30 am
USD - Core Durable Goods Orders m/m
06:30 am
USD - Durable Goods Orders m/m
08:00 am
USD - Revised UoM Consumer Sentiment
Market Indicators
HIGH
LOW
USD/JPY
138.9100
138.2400
EUR/USD
1.0821
1.0763
GBP/USD
1.2447
1.2373
USD/CHF
0.9029
0.8975
AUD/USD
0.6662
0.6611
USD/CAD
1.3549
1.3486
DOW
33,155.9200
NASDAQ
12,687.8600
OIL
72.8300
GOLD
1,968.5200
Market Watch
Mon May 22, 2023
Daily Insight
Americas

Debt-ceiling negotiations remain on center stage for markets as traders take on more defensive positions against a U.S. debt default. Nobody knows exactly when the U.S. government will run out of money, but the consensus is early June. Treasury Secretary Janet Yellen has estimated that funds could be exhausted by June 1st.

U.S. Treasury yields are higher in all tenors following hawkish comments by Fed officials early in the trading day. The Fed’s Kashkari said the probability of a June hike or cut is too close to call. And the Fed’s Bullard indicated two more 25 basis-point hikes will be needed in 2023, citing tight labor markets.

The U.S. dollar index is -0.03% today after trading in narrow overnight ranges. Dollar gains vs. the G10 are 0.36% vs. JPY, 0.22% vs. NOK, and 0.20% vs. AUD. The primary dollar decline is -0.22% vs. CHF.

Widening the view of the dollar’s performance against all major currencies, the biggest move is a 0.73% gain vs. MXN. The Mexican peso is under pressure on two fronts today: first is a shift to ‘risk off’ stemming from the debt-ceiling impasse, as traders exit the more volatile assets in exchange for the safety of the dollar; and second are the hawkish Fed comments which have lifted treasury yields and bringing the Fed’s overnight rate and Banxico’s overnight rate closer together (and reducing the expected payoff in the short USDMXN carry trade in the process).

In other markets, U.S. equities have opened trading higher by a slim margin, gold is -0.22%, and oil is -0.25%.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Tue May 23, 2023
07:45 am
USD - Flash Manufacturing PMI
07:45 am
USD - Flash Services PMI
08:00 am
USD - New Home Sales
08:00 am
USD - Richmond Manufacturing Index
Wed May 24, 2023
08:05 am
USD - Treasury Sec Yellen Speaks
12:00 pm
USD - FOMC Meeting Minutes
Thu May 25, 2023
06:30 am
USD - Prelim GDP q/q
06:30 am
USD - Prelim GDP Price Index q/q
06:30 am
USD - Unemployment Claims
07:00 am
USD - Pending Home Sales m/m
Fri May 26, 2023
06:30 am
USD - Core PCE Price Index m/m
06:30 am
USD - Core Durable Goods Orders m/m
06:30 am
USD - Durable Goods Orders m/m
08:00 am
USD - Revised UoM Consumer Sentiment
Market Indicators
HIGH
LOW
USD/JPY
138.5700
137.5000
EUR/USD
1.0831
1.0796
GBP/USD
1.2472
1.2414
USD/CHF
0.9014
0.8941
AUD/USD
0.6668
0.6628
USD/CAD
1.3518
1.3486
DOW
33,377.5800
NASDAQ
12,737.1300
OIL
71.5500
GOLD
1,971.7000
Market Watch
Fri May 19, 2023
Daily Insight
Americas

Banxico (Mexico’s central bank) left the overnight rate at 11.25% (as expected) in its policy announcement yesterday, the first pause in its tightening cycle since June of 2021 when the official rate was 4%. The bank’s policy statement indicated that inflation was beginning to ease but that the risk for inflation remained to the upside, and that the key rate is expected to remain at 11.25% ‘for an extended period of time’. The peso is 0.46% today vs. the dollar, its first gain after three consecutive daily declines. Near-term support is seen at 17.4000 and resistance at 17.9000.

The U.S. dollar is trading lower vs. all G10 and major currencies today. The biggest swings for the dollar are -1.0% vs. NZD, -0.93% vs. NOK, -0.66% vs. AUD, -0.48% vs. CHF, -0.46% vs. MXN, -0.45% vs. EUR, and -0.41% vs. GBP.

USDCNH is lower by 0.47% after China’s central bank vowed to curb speculation in the yuan. Offshore yuan (USDCNH) had been 0.36% after reaching 7.0752 overnight, its highest mark since December.

The major global equity indexes are universally higher today, and combined with the lower dollar can be read as increased risk appetite. Fed Chairman Powell is scheduled to speak today at 11:00am ET, and his comments will be watched for clues on the Fed’s next policy decision in June.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Fri May 19, 2023
06:30 am
CAD - Retail Sales m/m
06:30 am
CAD - Core Retail Sales m/m
09:00 am
USD - Fed Chair Powell Speaks
Market Indicators
HIGH
LOW
USD/JPY
138.7300
137.9700
EUR/USD
1.0823
1.0760
GBP/USD
1.2468
1.2392
USD/CHF
0.9059
0.9004
AUD/USD
0.6671
0.6617
USD/CAD
1.3513
1.3469
DOW
33,721.0000
NASDAQ
13,914.5000
OIL
73.3100
GOLD
1,962.4500
Market Watch
Thu May 18, 2023
Daily Insight
Americas

The dollar is trading higher on increased hope of a resolution to the debt ceiling negotiations. The U.S. Dollar Index gained 0.22% overnight, its 5th daily gain in the last six trading days and is now at its highest level since March 27th.

Today’s primary dollar gains: 0.61% vs. MXN, 0.42% vs. GBP, 0.40% vs. EUR, 0.38% vs. JPY, 0.36% vs. AUD, 0.34% vs. CHF, and 0.12% vs. CAD. USDJPY reached its highest point since December 2022 at 138.39.

U.S. Treasury yields are sharply higher today in all tenors, with the widest gain the 5-year of 0.063%. Lower probability of a U.S. debt default has increased risk appetite, prompting traders to exit traditional ‘safe’ assets in exchange for risk. Selling Treasury bills simultaneously drives down the price and lifts yield. Gold (another ‘safe’ asset) is lower by 0.63% today at $1,969.05/oz, its lowest price since April 3rd.

Global equity indexes are mostly higher today, more evidence of the revived ‘risk-on’ enthusiasm in today’s markets.

Three Federal Reserve policymakers are scheduled to speak today (Jefferson, Barr, and Logan), and their comments will be closely watched for any hint of change to the Fed’s rate hike cycle. Fed Chairman Powell and former Fed Chairman Bernanke are scheduled to speak tomorrow.

Mexico’s central bank will announce its overnight rate policy today. No change expected to the current 11.25%. U.S. Weekly Jobless Claims for the week ending May 13th were 242k, below the 251k estimate.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Thu May 18, 2023
06:30 am
USD - Philly Fed Manufacturing Index
06:30 am
USD - Unemployment Claims
08:00 am
USD - Existing Home Sales
09:00 am
CAD - BOC Gov Macklem Speaks
Fri May 19, 2023
06:30 am
CAD - Retail Sales m/m
06:30 am
CAD - Core Retail Sales m/m
09:00 am
USD - Fed Chair Powell Speaks
Market Indicators
HIGH
LOW
USD/JPY
138.3900
137.2900
EUR/USD
1.0848
1.0785
GBP/USD
1.2493
1.2415
USD/CHF
0.9023
0.8973
AUD/USD
0.6668
0.6620
USD/CAD
1.3485
1.3448
DOW
33,394.0000
NASDAQ
13,643.2500
OIL
72.3100
GOLD
1,967.5300
Market Watch
Wed May 17, 2023
Daily Insight
Americas

U.S. Treasury yields are lower in most tenors today with the biggest price increases in the 7yr – 20yr tenors -0.021%. A hint of positive news on the debt-ceiling impasse is pressuring yields following House Speaker Kevin McCarthy’s comment that a deal by the end of the week is feasible. Early this month four-week treasuries sold at a record 5.84% yield which was the highest yield for any Treasury bill since 2000.

Higher Treasury yields have enticed flows into long dollar positions. The U.S. dollar is higher today in 9/10 of the G10 pairs and most majors: 0.99% vs. NOK, 0.78% vs. SEK & MXN, 0.53% vs. JPY, 43% vs. CHF, 0.37% vs. EUR, and 0.27% vs. GBP.

The next FOMC meeting is less than a month away now (June 14th) and Fed Funds Futures are implying only a 17% probability of a quarter-point hike. But that changes beginning with the FOMC’s July meeting as markets begin to price in a steadily increasing chance of rate cuts, with a high probability of 0.25% cuts in November, December, and January 2024.

U.S. equity futures are trading higher on increased hopes of a resolution in the debt-ceiling crisis.

Bitcoin and gold (both recently used to hedge against a U.S. government default) are lower today: BTC -1.06% and gold -0.23%.

trends*
USD   JPY
USD
 / 
JPY
EUR   USD
EUR
 / 
USD
EUR   GBP
EUR
 / 
GBP
GBP   USD
GBP
 / 
USD
USD   CHF
USD
 / 
CHF
AUD   USD
AUD
 / 
USD
USD   CAD
USD
 / 
CAD
USD   MXN
USD
 / 
MXN
economic calendar
Thu May 18, 2023
03:15 am
GBP - Monetary Policy Report Hearings
06:30 am
USD - Philly Fed Manufacturing Index
06:30 am
USD - Unemployment Claims
08:00 am
USD - Existing Home Sales
09:00 am
CAD - BOC Gov Macklem Speaks
Fri May 19, 2023
06:30 am
CAD - Retail Sales m/m
06:30 am
CAD - Core Retail Sales m/m
09:00 am
USD - Fed Chair Powell Speaks
Market Indicators
HIGH
LOW
USD/JPY
137.2400
136.3100
EUR/USD
1.0874
1.0814
GBP/USD
1.2494
1.2422
USD/CHF
0.9012
0.8949
AUD/USD
0.6671
0.6629
USD/CAD
1.3536
1.3462
DOW
33,212.0000
NASDAQ
13,516.0000
OIL
71.1700
GOLD
1,987.4500

*The arrows indicate how the base currency performed against the counter currency overnight. This document is for information purposes only and does not constitute any recommendation or solicitation to any person to enter into any transaction or adopt any trading strategy, nor does it constitute any prediction of likely future movements in exchange rates or prices or any representation that any such future movements will not exceed those shown on any illustration. All exchange rates and figures appearing are for illustrative purposes only. You are advised to make your own independent judgment with respect to any matter contained herein.