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Easing Wagers Pull Back Slightly as Wariness Returns

Not so fast. Currency markets are turning more cautious this morning as traders trim US rate-cut bets slightly from levels hit after Wednesday’s Goldilocks-esque inflation and retail sales reports. The greenback is inching up against its major counterparts, long-end Treasury yields are pushing higher, and North American equity futures are setting up for a slightly diminished open. But the dollar’s outperformance has faded in recent weeks. After a series of data releases showing labour markets slowing, consumer spending trending down, and inflation pressures subsiding, economists are revising growth projections lower. Federal Reserve chair Jerome Powell’s repeated reference to “restrictive” rate...

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China data in focus

• Partial unwind. Quieter markets overnight. US equities ease, bond yields rebounded, & the USD was a bit firmer. AUD gave back some ground.• AU jobs. Employment positive, but unemployment ticked up more than predicted. Seasonality may have been at play, as it was earlier in the year.• China data. RBA still looks set to lag its peers. Yield differentials should be AUD supportive. As would signs of improvement in China’s growth pulse. Compared to the post US CPI moves a day ago markets were a bit quieter overnight with some retracement coming through. After touching a fresh record high...

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Soft Landing Hopes Drive Dollar Lower

Global stock markets are holding near record highs, Treasury yields are lower across the curve, and the dollar is in retreat as investors bring forward expectations for policy easing from the Federal Reserve. Data out yesterday morning showed core consumer prices advanced at the slowest annual rate in three years last month, while underlying retail sales shrank, suggesting that the world’s largest economy is losing momentum in the face of still-restrictive interest rates. The core consumer price index climbed 3.6 percent in April from a year ago, marking the weakest pace since April 2021, and “control group” retail sales slumped...

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Calm before the US CPI storm?

• Quiet start. Minimal moves in equities, bonds & FX overnight. AUD little changed despite the jump in base metal prices.• AU Budget. A lot has been pre-announced. Relief measures look set to be designed to lower near-term headline CPI. But this may not impact core CPI.• US & UK data. Ahead of the US CPI report, US Producer Prices are released tonight. Fed Chair Powell also speaks. In the UK, jobs/wages data is due. A quiet start to the new week. The limited news flow has kept markets range bound. The US S&P500 ended the session unchanged. US bond...

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US Exceptionalism Fades, Weighing On Greenback

The “US exceptionalism” trade took another blow yesterday morning when the Bureau of Labor Statistics said the number of Americans filing initial applications for unemployment benefits rose last week to an eight-month high. The jump in jobless claims – up 22,000 to a seasonally-adjusted 231,000 in the week ended May 4 – surprised economists and helped bolster expectations for rate cuts from the Federal Reserve, helping erode the dollar’s yield premium and lift other currencies in relative terms. Softness in the labour market dovetails with our belief that re-acceleration hopes for the economy have become overblown, and we think that...

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