Dollar Pressured, Less Hawkish FOMC
The U.S. dollar came under pressure yesterday and today due to less hawkish comments from Federal Reserve officials.
Inflation in the euro zone fell by more than expected, though European Central Bank President Christine Lagarde said there is “no clear evidence” that it has peaked and promised to lift interest rates further.
Euro zone inflation eased to 6.1% in May from 7.0% in April, which is below expectations of 6.3%.
Core inflation, which excludes volatile food and fuel prices, fell to 5.3%, which is below expectations for 5.5%.
STOCK INDEX FUTURES
Stock index futures bounced off of lows yesterday after comments from Fed Governor Philip Jefferson and Philadelphia Fed President Patrick Harker suggested the central bank will leave rates steady this month.
The Fiscal Responsibility Act of 2023 passed in the House of Representatives. The bill is now headed to the Senate and is anticipated to be approved before the June 5 default deadline.
According to executive coaching firm Challenger, Gray & Christmas, Inc., U.S. companies have announced more job reductions this year than during all of 2022.
Planned layoffs reached approximately 417,500 jobs through May, which is more than four times the job cuts during the same period a year ago. U.S. based employers announced 80,890 job cuts in May of 2023, which is higher than 66,995 in April.
The May Automated Data Processing Inc. employment report showed an increase of 278,000 when up 160,000 were expected.
Nonfarm productivity on the first quarter was down 2.1% when a decline of 2.7% was anticipated and unit labor costs increased 4.2% when up 6.3% was predicted.
Jobless claims in the week ended May 27 were 232,000 when 235,000 were estimated.
The 8:45 central time May PMI manufacturing final is expected to be 48.5.
The 9:00 May Institute for Supply Management manufacturing index is predicted to be 47.0.
The 9:00 April construction spending report is predicted to show a 0.2% increase.
INTEREST RATE MARKET FUTURES
Futures firmed yesterday after Federal Reserve Governor Philip Jefferson said he was in favor of “skipping a rate hike at a coming meeting,” as an opportunity to “see more data before making decisions about the extent of additional policy firming.”
Patrick Harker of the Federal Reserve will speak at 12:00.
Financial futures markets are predicting there is a 72% probability that the Federal Open Market Committee will keep its fed funds rate unchanged at its June 14 policy meeting, and there is a 28% chance of a 25 basis point increase.
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