The dollar has been trading steady-to-softer in the latest phase, putting a little distance in from the rebound highs that were seen on Friday or yesterday versus the other G10+ currencies. The 10-year U.S. Treasury rate, which is a major focus of currency markets at the moment, has fallen back below 1.490%, after rising above 1.50% yesterday. This marked a roughly one-third retracement of last week’s sharp yield drop.
Other industrial commodities are also down this morning, after yesterday’s new 32-month highs. Global stock markets Have remained buoyant and lacking direction.
FOMC Meeting, starting today and ending tomorrow.
The FOMC meeting is the highlight of today’s agenda. As the FOMC began to appear last week, the yields dipped significantly, despite May’s CPI reaching a record high.
Investors need to keep an eye out for the US 10 Year Bond, as it has recently returned. It could be due to two things. Congress has been unable to agree on any future spending. Second, and perhaps most importantly, it does not seem that the Fed is raising interest rates.
The policy review this week could have a hawkish impact on bonds and the dollar. It will be difficult for the Fed to adopt a more dovish policy, as they are already ultra-accommodative.
The Committee might acknowledge that it has started taper discussions, even though labor market conditions are far from being recovered and the pandemic relief measures continue to cause distortions. According to the Fed’s new policy of inflation tolerance, a recovering job market is necessary for the Fed before it can begin unwinding its stimulus. The median of the dot plot should still show a rate increase in 2023. However, there is a possibility that high-end estimates will rise.
Remind yourself that the Fed wants you to know its intentions. “assessment of progress toward its longer-run goals well in advance” When the Fed believes it is time to reduce quantitative easing. If the Fed decides it is time to discuss a plan of adjusting the pace at which asset purchases are made, Treasury yields and the dollar will rise. In the absence of a plan, Treasury yields will spike and the dollar’s value will rise.
May retail sales, which are expected to fall 0.6% overall from an unchanged reading in April, and dip 0.1% on an ex-auto basis from -0.8% previously. Headline May PPI should rise 0.3% from the 0.6% increase previously, while the core reading is expected up 0.3% from 0.7% in April. May industrial production is penciled in at up 0.2%, from up 0.5% in April. Capacity use in May is expected to be up from 74.6% to 74.7%.
The June Empire State index likely eased to 22.0 from 24.3. April business inventories are expected to fall 0.1% from a 0.3% rise previously. The June NAHB housing market index is seen steady at 83. Data on April TIC flows are also expected. The Treasury auctions $24 bln of reopened 20-year bonds.
Oracle is the only company to report a large profit.
