US inflation data Wednesday.
The US IBD consumer confidence index dipped sharply to a 6-month low of 41.6 for May from 47.4 previously and well below expectations of 48.2.
The longer-term outlook also dipped to a 6-month low and the index has been in contraction territory for 21 months.
New York Fed President Williams stated that he is confident that the central bank is on the path to lower inflation. He added that there are some signs that labour demand is cooling, but there are still concern that core inflation outside the housing sector is still persistent due to imbalances in demand and supply.
According to Williams, the Fed has not said that rates have peaked and he does not see scope for lower rates this year. The rhetoric overall was in line with the Federal Reserve meeting last week.
US Treasuries overall lost ground on Tuesday with the 10-year yield increasing to 1-week highs just above the 3.50% level.
ECB council member Kazimir stated that slowing the pace of rate hikes lets the ECB go higher for longer and he also warned that rate hikes may have to continue beyond July. Bundesbank head Nagel also stated that interest rates needed to increase further.
The Euro was unable to make any headway despite relatively hawkish rhetoric.
The latest US consumer prices data will be released on Wednesday and will have significant implications for all asset classes.
Consensus forecasts are for a 0.4% increase in prices for the month with the headline year-on-year rate to hold at 5.0% while the annual core rate is expected to edge lower to 5.5% from 5.6%.
The Euro lost ground on Tuesday with another round of net selling on the crosses. The dollar gained an element of defensive support. EUR/USD quickly dipped below 1.1000 and posted lows below 1.0950. EUR/USD recovered to 1.0970 on Wednesday as risk appetite held relatively steady. USD/JPY was held around 135.15 despite higher US yields.
The Swiss franc overall edged higher amid weaker equities. EUR/CHF retreated to 0.9765 with USD/CHF at 0.8900 from 0.8940 highs.
Sterling was hampered by a retreat in equities, but held a firm tone ahead of Thursday’s Bank of England policy decision. GBP/USD found support below 1.2600 and traded around 1.2620 while EUR/GBP dipped to fresh 2023 lows at 0.8680.
Commodity currencies were unable to make further headway as the US currency gained ground. AUD/USD dipped to 0.6750 before a recovering to near 0.6770 on Wednesday.- USD/CAD hit selling just above 1.3400 before a retreat to 1.3380.
|13:30||Core CPI m/m||0.30%||0.40%|