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The Greenback ticked higher upon seeing the core PCE price index but gave back its intraday gains and more throughout the session as traders turned their attention to weaker Fed rate hike odds in September.

  • U.S. core PCE price index up 0.2% vs. projected 0.1% uptick
  • U.S. personal income and spending up 0.4% as expected
  • U.S. CB consumer confidence index fell from 119.4 to 117.9 in May
  • Canadian current account deficit widened from 11.8B CAD to 14.1B CAD
  • Canada’s RMPI rose 1.6% vs. projected 3.8% increase
  • Canada’s IPPI up 0.6% vs. estimated 0.7% gain
  • FOMC member Brainard: U.S. GDP growth to rebound in Q2
  • Brainard: Could delay future hikes if soft inflation persists

Major Events:

Mixed U.S. economic data

Uncle Sam’s numbers were a mix of red and green, but the data generally kept June interest rate hike expectations in play. The CME FedWatch tool indicated an increase in tightening odds from 84.2% to 88.8% next month upon seeing the latest batch of reports.

The core PCE price index posted a 0.2% uptick versus the projected 0.1% rise and the earlier 0.1% decline. Personal income and spending rose 0.4% as expected, representing improvements over the earlier 0.2% and 0.3% gains, respectively. Components of the report revealed that this was mostly due to higher spending on recreational goods, vehicles, and gasoline.

A few hours later, the CB consumer confidence report reflected a drop from 119.4 to 117.9 to indicate weaker optimism instead of improving to 120.1. Respondents of the survey were less upbeat about their short-term economic outlook, particularly when it comes to business conditions.

U.S. equity indices closed lower for the day:

  • S&P 500 index is down 2.90 points (-0.12%) t0 2,412.92
  • Nasdaq ended 7 points lower (-0.11%) to 6,203.19
  • Dow 30 index closed 50.61 points (-0.24%) to 21,029.67

FOMC voting member Brainard’s testimony

Another factor that may have dampened the dollar’s spirits is FOMC member Brainard’s speech, during which she warned that slowing inflation could prompt policymakers to rethink future hikes.

On a less downbeat note, Brainard mentioned that U.S. GDP growth is likely to rebound this quarter and that data has been consistent with this expectation. She also cited that the global outlook has improved and that a rate hike is appropriate fairly soon.

As for remaining risks, Brainard noted that the lack of progress in core inflation is still a concern and that the Fed might want to delay further tightening moves if more downside price pressures are seen.

Major Market Mover(s):

USD

The scrilla edged higher when the latest batch of reports kept June rate hike expectations strong then reversed after Brainard hinted at a possible pause in tightening.

EUR/USD dipped to a low of 1.1172 then climbed back to 1.1186 (+0.02%), GBP/USD tumbled to a low of 1.2843 (-0.12%), and USD/JPY turned upon hitting a high of 111.24 to a low of 110.86.

Watch Out For:

  • 10:00 pm GMT: RBNZ Financial Stability Report
  • 12:00 am GMT: U.K. BRC shop price index (-0.5% previous)
  • 12:50 am GMT: Japanese preliminary industrial production (4.2% expected, -1.9% previous)
  • 2:00 am GMT: Chinese official manufacturing PMI (51.0 expected, 51.2 previous)
  • 2:00 am GMT: Chinese official non-manu PMI (54.0 previous)
  • 2:30 am GMT: Australian private sector credit (0.4% expected, 0.3% previous)
  • 6:00 am GMT: Japanese housing starts y/y (-1.4% expected, +0.2% previous)