- 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.