The GBP is the strongest and the CHF is the weakest as the North American session begins

The GBP is the strongest and the CHF is the weakest as the North American session begins. The USD is mixed ahead of the key core PCE data at 8:30 AM ET.

Overnight, in Japan, the Tokyo Core Consumer Price Index (CPI) year-on-year rose by 3.2%, which was less than the expected 3.4% but more than last month’s 3.1%. The unemployment rate remained stable at 2.6%, matching both the forecast and the previous month’s figure. Preliminary Industrial Production month-on-month decreased by -1.6%, worse than the anticipated -0.9% drop and a significant decline from the previous month’s 0.7% growth. The USDJPY moved to yet a new high but has backed off from the high. See video on the USDJPY being overbought HERE.

In China, the Manufacturing Purchasing Managers’ Index (PMI) was 49.0, on par with the forecast and slightly higher than last month’s 48.8, though it still indicates contraction in the sector (below 50). The Non-Manufacturing PMI was 53.2, lower than the predicted 53.7 and last month’s 54.5, signaling slower expansion in the non-manufacturing sector.

Jerome Powell of the U.S. Federal Reserve and Christine Lagarde of the European Central Bank (ECB) affirmed their focus on conquering inflation, stating that their job was not yet complete. Both also spoke how policy was data dependent. Today euro flash CPI was released, and the US will see inflation data as well.

In the U.S., the core personal consumption expenditures index, the Fed’s favored inflation measure, is forecast to rise by 4.7% annually (vs 4.7% last month) and 0.3% for May (vs 0.4% last month). The numbers indicate that inflation remains persistent and reinforcing expectations for another interest rate increase, likely in July.

In Europe, Lagarde has already largely signaled another rate increase from the ECB in July. The upcoming release of consumer price data for the entire eurozone will offer hints at how many more rate hikes may be anticipated this year. The June CPI figure was 5.5%, slightly better than expected (vs 5.4%). and a drop from 6.1% last month. The core came in at 5.4% vs 5.5% expected but up from 5.3% last month. Inflation in France, Spain, and Italy reached a 14-month low, while German consumer price increases picked up this month.

It is month and quarter end and the US stocks are pointing to a higher opening today. Markets are anticipating the release of critical PCE inflation data and are rewarding the end of a positive month and quarter, and 1H. The S&P 500 is set to record monthly gains of over 5%, marking its best monthly performance since January, and a quarterly increase of nearly 7%. The Nasdaq Composite, with a monthly gain of approximately 5% and a quarterly return of over 11%, has performed even more impressively. The Dow is up 3.69% this month and 2.55% this quarter.

For the first half of 2023, the Dow is up 2.94%, the S&P is up 14.51% and the Nasdaq is up 29.86% which is the best 6-month gain since 2H 1999.

US yields are higher and higher for the month as traders adjusted to a tighter Fed. The 2 year is up 51 bps for the month, while the 10 year is up 23.4 bps..

Crude oil is little changed. This week prices are higher for crude by about 1%, helped by a huge drawdown in inventories (by 9.6 million barrels last week), indicating a tightening supply. Additionally, the U.S. GDP for the first quarter was revised upward to an annualized rate of 2.0% from the previously reported pace of 1.3%.

However, on a quarterly basis, crude is down 7.69%, which represents the first consecutive quarterly losses since 2019, and attributed to China’s slow economic recovery and substantial interest rate hikes by Western central banks.

The week concludes with the release of the U.S. oil rig count from Baker Hughes, a future supply indicator, and the Commodity Futures Trading Commission (CFTC) positioning data.

A snapshot of the markets currently shows:

  • Crude oil is trading near unchanged at $69.90
  • Spot gold is trading down $2.60 or -0.14% $1904.67
  • Silver is down $0.18 -0.80% to $22.37
  • Bitcoin is trading higher at $30,929, but below the high price of $31,268

In the premarket for US stocks, the major indices are trading modestly higher in premarket trading

  • Dow Industrial Average is trading 104.58 points after yesterday’s 269.76 point rise led by financials
  • S&P index is trading up 18.8 points after yesterday’s 19.60 point rise
  • NASDAQ index is trading up 80 points after yesterday’s near unchanged date yesterday

In the European equity markets, the major indices are trading higher and also looking to close the month with solid gains

  • German DAX up 1.14%. For the month the index is up 2.97%
  • France’s CAC up 1.08%. For the month the index is up 4.13%
  • UK’s FTSE 100 up 0.71%. For the month the index is up 1.06%
  • Spain’s Ibex up 1.19%.. For the month the index is up 6.35%
  • Italy’s FTSE MIB up 1.18% (delayed). For the month the index is up 8.48%

In the Asian Pacific market today, markets were mixed

  • Japan’s Nikkei felt -0.14%. For June the index gained 7.45%.
  • Australia’s S&P/ASX 200 index rose 0.12%. For June the index rose 1.60%
  • China’s Shanghai composite index rose 0.62%. For June the index fell -0.78%

In the US debt market yields are higher

  • 2-year yield 4.905% up to .8 basis points
  • 5-year yield 4.167% up to .5 basis points
  • 10-year yield 3.87% up 1.6 basis points
  • 30-year yield 3.920% up 0.8 basis points

In the European debt market, benchmark 10-year yields are higher:

This article was written by Greg Michalowski at Source