US House approves debt-ceiling deal.
German consumer prices declined 0.1% for May compared with expectations of a 0.2% increase with the inflation rate declining sharply to 6.1% from 7.2% previously. The HICP rate also declined to 6.3% from 6.8% previously.
The Chicago PMI manufacturing index declined to a 6-month low of 40.4 for May from 48.6 previously and below expectations of 47.0. The data maintained a run of notably negative releases for the manufacturing sector.
The JOLTS data recorded an increase in job-openings to 10.10mn for April from a revised 9.75mn previously and above expectations of 9.78mn. The data maintained expectations that the labour market was still tight.
Fed Governor Jefferson stated that skipping a rate increase at the June meeting would give the central bank more time to assess the data, although this did not mean that rates have peaked. Philadelphia Fed Harker took a similar view, reiterating that it would be a skip and not a pause.
There was a shift in Fed Funds pricing with expectations of a June hike dipping to below 40%, but the most likely outcome is still seen as a hike in July.
Canadian GDP data for the first quarter of 2023 was stronger than expected with 0.8% growth compared with consensus forecasts of 0.4%. The data triggered some speculation that the Bank of Canada could have to increase interest rates again.
The dollar posted fresh 9-week highs on Wednesday, but retreated from intra-day highs following the re-pricing of June Fed Funds futures.
The US House of Representatives voted in favour of the debt-ceiling Bill with a comfortable majority and the legislation will now pass to the Senate.
On Thursday, the US will release ADP private-sector payrolls data, jobless claims and ISM manufacturing index.
The data releases will be important for underlying sentiment towards the US economy. Consensus forecasts are for all three releases to the slightly weaker than the previous readings with ADP job gains of around 175,000.
The Euro-Zone inflation data will be released on Thursday. Consensus forecasts are for a decline to 6.3% from 7.0% with the core rate at 5.5% from 5.6%.
The Euro continued to drift lower after Wednesday’s European open with expectations of a less aggressive ECB stance. EUR/USD dipped to 9-week lows around 1.0660. The Euro spiked briefly on month-end position adjustment. EUR/USD only briefly moved above 1.0700 before a fresh slide. The dollar overall held a firm tone, but retreated from 9-week highs after the Fed rhetoric. EUR/USD settled around 1.0680 in early Europe on Thursday.
USD/JPY was unable to hold a spike to 140.40 after the US JOLTS data. The yen gained some subsequent protection from a small decline in US yields. The shift in Fed rhetoric also underpinned the yen. USD/JPY dipped to just below 139.00 before a recovery to 139.45.
The Swiss franc lost some ground. EUR/CHF advanced to 0.9750 before fading, USD/CHF posted 8-week highs at 0.9145 before a retreat to 0.9110.
There was choppy Sterling trading due to month-end factors. GBP/USD posted a solid advance to highs at 1.2450 before settling around 1.2430.
The Australian dollar was again undermined by a firm US dollar. AUD/USD dipped to lows at 0.6465. A dollar correction and stronger than expected Caixin PMI data pushed AUD/USD above 0.6510. Stronger than expected GDP data underpinned the Canadian dollar. USD/CAD dipped back below 1.3600 from highs just above 1.3650 with a further net retreat to 1.3565 on Thursday.
|CPI Flash Estimate y/y
|ADP Non-Farm Employment Change
|ISM Manufacturing PMI