inflation gauge

FX Daily: Bond bears give new energy to the dollar

A very soft 30-year Treasury auction and hawkish comments by Powell triggered a rebound in US yields and the dollar yesterday. Dynamics in the rates market will remain key while awaiting market-moving US data. In the UK, growth numbers in line with expectations, while in Norway, inflation surprised to the upside.

USD: Auction and Powell trigger dollar rebound

The dollar chased the spike in US yields yesterday following a big tailing in the 30-year Treasury auction and hawkish comments by Fed Chair Jerome Powell. Speaking at the IMF conference, Powell warned against reading too much into the softer inflation figures and cautioned that the inflation battle remains long, with another hike still possible. If we look at the Fed Funds future curve, it is clear that markets remain highly doubtful another hike will be delivered at all, but Powell’s remarks probably represent the culmination of a pushback against the recent dovish repric

Steel majors invest in green steel, but change might be driven by contenders

Resilient Canadian Economy Surprises with Strong GDP Growth; Concerns Linger over Rate Hikes and Recession Risks

Ed Moya Ed Moya 04.07.2023 08:08
Canada’s GDP surprises to the upside US PCE Price Index eases in June ISM Manufacturing PMI expected to contract The Canadian dollar is trading at 1.3259, up 0.07%. Canadian markets are closed for a holiday and I expect USD/CAD movement to be limited. On the economic front, the US releases ISM Manufacturing PMI. The index is projected to tick lower to 46.9 in June, down from 47.0 in May.   Canada’s GDP climbs in May Canada wrapped up the week with a strong GDP report. The economy is estimated to have gained 0.4% in May, after flatlining in April. The Canadian economy continues to surprise with its resilience despite rising interest rates. The Bank of Canada raised rates to 4.75% earlier this month after a five-month pause, arguing that monetary policy was not restrictive enough. The BoC statement pointed at strong consumer spending and higher-than-expected growth as factors in the decision to raise rates. The BoC also expressed concerns that inflation could remain entrenched above the 2% target. The strong GDP report has added fuel to speculation that the BoC will raise rates again on July 12th but there is also concern that higher rates will lead to a recession. Canadian 10-year bonds have fallen further below the 2-year bonds, as the yield curve inversion, a predictor of recession, has become even more pronounced. Inflation has been falling and headline inflation eased to 3.4% in May, down from 4.4% in April. Core inflation also declined to 3.8%, down from 4.2%. The question remains whether inflation, still well above the 2% target, is falling fast enough to prevent another rate hike in July. In the US, there were more signs that inflation is weakening. On Friday, the PCE Price Index, which is the Fed’s favourite inflation gauge, declined from 0.4% to 0.1% in June. As well, UoM Inflation Expectations dropped to 3.3% in June, down from 4.2% in May and the lowest since March 2021. Despite these signals that inflation is decelerating, the Fed is widely expected to raise rates at the July meeting.   Canada’s GDP surprises to the upside US PCE Price Index eases in June ISM Manufacturing PMI expected to contract The Canadian dollar is trading at 1.3259, up 0.07%. Canadian markets are closed for a holiday and I expect USD/CAD movement to be limited. On the economic front, the US releases ISM Manufacturing PMI. The index is projected to tick lower to 46.9 in June, down from 47.0 in May. Canada’s GDP climbs in May Canada wrapped up the week with a strong GDP report. The economy is estimated to have gained 0.4% in May, after flatlining in April. The Canadian economy continues to surprise with its resilience despite rising interest rates. The Bank of Canada raised rates to 4.75% earlier this month after a five-month pause, arguing that monetary policy was not restrictive enough. The BoC statement pointed at strong consumer spending and higher-than-expected growth as factors in the decision to raise rates. The BoC also expressed concerns that inflation could remain entrenched above the 2% target. The strong GDP report has added fuel to speculation that the BoC will raise rates again on July 12th but there is also concern that higher rates will lead to a recession. Canadian 10-year bonds have fallen further below the 2-year bonds, as the yield curve inversion, a predictor of recession, has become even more pronounced. Inflation has been falling and headline inflation eased to 3.4% in May, down from 4.4% in April. Core inflation also declined to 3.8%, down from 4.2%. The question remains whether inflation, still well above the 2% target, is falling fast enough to prevent another rate hike in July. In the US, there were more signs that inflation is weakening. On Friday, the PCE Price Index, which is the Fed’s favourite inflation gauge, declined from 0.4% to 0.1% in June. As well, UoM Inflation Expectations dropped to 3.3% in June, down from 4.2% in May and the lowest since March 2021. Despite these signals that inflation is decelerating, the Fed is widely expected to raise rates at the July meeting.   USD/CAD Technical USD/CAD is putting pressure on resistance at 1.3254. Next, there is resistance at 1.3328 1.3175 and 1.3066 are providing support  
EUR/USD Rejected at 1.1000: Anticipating Rangebound Trading and Assessing ECB Dovish Bets

US Dollar Rises as Bond Market Ignites: A Look at Dollar's Resurgence

ING Economics ING Economics 10.11.2023 10:03
FX Daily: Bond bears give new energy to the dollar A very soft 30-year Treasury auction and hawkish comments by Powell triggered a rebound in US yields and the dollar yesterday. Dynamics in the rates market will remain key while awaiting market-moving US data. In the UK, growth numbers in line with expectations, while in Norway, inflation surprised to the upside. USD: Auction and Powell trigger dollar rebound The dollar chased the spike in US yields yesterday following a big tailing in the 30-year Treasury auction and hawkish comments by Fed Chair Jerome Powell. Speaking at the IMF conference, Powell warned against reading too much into the softer inflation figures and cautioned that the inflation battle remains long, with another hike still possible. If we look at the Fed Funds future curve, it is clear that markets remain highly doubtful another hike will be delivered at all, but Powell’s remarks probably represent the culmination of a pushback against the recent dovish repricing. Remember that in last week’s FOMC announcement, the admission that financial conditions had tightened came with the caveat that the impact on the economy and inflation would have depended on how long rates would have been kept elevated. The hawkish rhetoric pushed by Powell suggests that the Fed still prefers higher Treasury yields doing the tightening rather than hiking again, and that is exactly what markets are interpreting. The soft auction for long-dated Treasuries also signals the post-NFP correction in rates may well have been overdone and could set a new floor for yields unless data point to a worsening US outlook. Today’s highlights in the US calendar are the University of Michigan surveys. Particular focus will be on the 1-year inflation gauge, which is expected to fall from 4.2% to 4.0%. On the Fed side, we’ll hear from Lorie Logan, Raphael Bostic and Mary Daly. Dynamics across the US yield curve will have a big say in whether the dollar can hold on to its new gains. Anyway, we had called for a recovery in DXY to 106.00 as the Fed would have likely pushed back against the dovish repricing. The rebound in yields should put a floor under the dollar, but we suspect some reassurances from the data side will be needed for another big jump in the greenback.

currency calculator