The Fed Chair Powell and ECB Pres. Lagarde spoke on a panel on policy and the economy from Portugal. Chair Jerome Powell commented inflation was back on a deflationary path, but that the labor market remains strong despite ongoing rebalancing. He emphasized the need for further progress on inflation, noting that recent data, including the latest PCE at 2.6%, indicates significant improvement. Powell expressed a desire to see more consistent data to ensure accurate readings of underlying inflation. He stressed the importance of taking a cautious approach to avoid undermining the progress made on inflation, highlighting that risks are becoming more balanced. The Fed chair refused to speak to a September cut. Recall the FOMC did reject one cut between now and the end of the year.

Meanwhile, ECB Pres. Lagarde stated that significant progress has been made in disinflation, with inflation moving in the right direction. She noted that the central bank's reaction function can be influenced by various economic actors. Lagarde raised concerns about potential permanent changes in services inflation but emphasized that achieving a 2% inflation rate in services is not necessary as it depends on the index's weighting. She stressed the importance of eliminating second-round effects of inflation. Additionally, she expressed concern over the increasing number of trade restrictions and indicated that a return to ultra-low interest rates is very likely.

A number of ECB officials also spoke today with most of them indicating that one cut is likely between now and the end of the year with the possibility of two but most cautious about going to far in their projections. Recall, the ECB to cut rates at their June meeting but it seemed that they felt pressured due to prior comments and projections. They are now being extra cautious in being too forthright about the future path of rates.

In the foreign exchange market today, the EURUSD is ending the day modestly lower. The USD is also mostly lower. The CAD is ending the day as the strongest of the major currency pairs. The Canada jobs report will be released on Friday along with the US jobs report.. The CHF is ending the day as the weakest of the majors. Yesterday the CHF was also weaker/the weakest.

In addition to the comments from the Fed Chair, Chicago Fed Pres. Goolsbee also spoke (dove and nonvoting member in 2024) from Sintra, Portugal. Fed's Goolsbee expressed concerns about warning signs indicating a weakening real economy but maintained optimism that the 'golden path' of economic recovery is still possible. He characterized this year's higher inflation as a temporary issue, noting that the overall trend in inflation is downward. While goods inflation has returned to pre-pandemic levels, services inflation remains slightly elevated but manageable. Housing inflation remains a complex issue, but Goolsbee suggested that using European measures would show the U.S. already at a 2% inflation rate. He highlighted the impact of higher-than-expected immigration on labor statistics and emphasized the need for flexibility in monetary policy, given the current 4% unemployment rate.

US JOLTs data for May came in stronger than expected with job openings rising to 8.140M vs 7.910M. Although stronger, the data was from May and the trend seems more to the downside over the last year or so. The ADP employment statistics will be released tomorrow morning at 8:15 AM ET with expectations of 163K vs 153K last month. The BLS employment report will be released on Friday with the expectations of 195K non-farm payroll jobs versus 272K last month. The unemployment rate is expected to remain steady at 4.0% while average hourly earnings are expected 0.3% versus 0.4% last month.

In other markets that US yields moved lower after sharp gains yesterday saw the 10 year yield rise by over 10 basis points. Today:

  • 2-year yield 4.747%, -2.5 basis points
  • 5-year yield 4.397%, -4.2 basis points
  • 10 year yield 4.435%, -4.3 basis points
  • 30 year 4.607%, -3.6 basis points

US major indices are closed higher with the broader S&P and NASDAQ indices closing at record levels. The Dow Industrial Average rate also rose, and is within 72 points of a new record closing level. The Russell 2008 also rose modestly:

  • Dow Industrial Average average rose 162.33 points or 0.41% at 39331.86
  • S&P index rose 33.92 points or 0.62% at 5509.02
  • NASDAQ index rose 149.46 points or 0.84% at 18028.76

The small-cap Russell 2000 rose 3.805 points or 0.19% at 2033.87.

In the oil market, prices fell $-0.32 or -0.3% at $83.08. Bitcoin was lower at $61,924. Gold closed marginally lower by $2.30 or -0.10% at $2329.20.