There were no economic releases today in the US. Canada was on holiday. US yields moved higher. The USD moved higher. Fedspeak was less dovish, but in line with others.

In total there were 5 Fed officials speaking today. In general, the storyline is that the Fed is on hold. The April CPI was nice but only one number. Inflation was disappointing in the 1Q of 2024. The Fed is on a wait and see mode. There is less talk about cutting rates and some comments that the Fed could still tighten.

Below are summaries from Fed's Bostic, Daly, Jefferson, Barr and Mester. All talked today.

  • Fed's Bostic noted that it will take some time to be certain that inflation is heading towards the 2% target. He described recent inflation data as very bumpy but expressed optimism that inflation will continue to decline this year and into next year, though there's still significant progress to be made. The Fed remains open to various economic outcomes, with risks currently balanced. Bostic highlighted that the Fed's policy stance is restrictive, with business leaders reporting a gradual slowdown in economic activity. He emphasized that it will take time for this momentum to fully impact the economy
  • Fed's Daly expressed that she is not yet confident that inflation is on a steady path toward the 2% target. While she anticipates an improvement in shelter inflation, she cautioned that this improvement will not be rapid. Daly's comments reflect a cautious outlook on the inflation trajectory, indicating the need for more substantial and sustained evidence of progress before declaring a definitive downward trend.
  • Fed's Jefferson stated that the current policy rate is in restrictive territory and highlighted ongoing improvements in the labor market and a gradual decline in inflation, although not as quickly as desired. He emphasized the importance of assessing incoming data and the evolving economic outlook to set appropriate policy rates. He noted that the U.S. economy continues to grow at a solid pace, with a resilient labor market, though consumer spending growth is expected to slow later this year. Jefferson noted that it is too early to determine if the recent slowdown in the disinflationary process will persist, despite April's encouraging inflation reading. He mentioned that long-term inflation expectations remain anchored, showing confidence in the Fed's 2% inflation goal.

    Jefferson also pointed out that restrictive monetary policy has impacted the housing market, with market rates taking time to influence PCE housing services prices. The significant increase in market rents during the pandemic might keep housing services inflation elevated for a while. He stressed the need to avoid focusing on single data points and acknowledged the resilience of the labor market, which provides the Fed with the flexibility to maintain its focus on lowering inflation. Jefferson remains cautiously optimistic that the Fed can continue battling inflation while keeping the economy strong​

  • Fed's Barr characterized Q1 inflation as "disappointing," noting it failed to provide the confidence needed to ease monetary policy. He stressed the need for the Fed to allow its tight policy further time to work effectively. Barr indicated that the Fed is in a good position to “hold steady" and monitor the economy closely, remaining vigilant to the risks associated with both inflation and employment mandates. He described the current approach as “prudent" for managing these dual risks, underscoring a balanced and cautious strategy in their policy stance​
  • Fed's Mester highlighted that current monetary policy remains restrictive, aimed at moderating demand to control inflation. She noted that while the April CPI report was positive, it is too early to determine the inflation trajectory, and more evidence is needed to confirm a sustainable path toward the 2% target. Mester observed that the labor markets are becoming better balanced, which should help reduce inflationary pressures. However, she warned that inflation risks are still tilted to the upside, and the lack of recent progress is concerning. Mester also emphasized that the timing depends on continued progress in reducing inflation. Although she previously anticipated three rate cuts this year, she now considers this outlook inappropriate given the current inflation dynamics. The economy remains strong, allowing the Fed to take its time in gathering data without risking stability. Mester mentioned that monetary policy is moderating demand, albeit not as quickly as expected, and inflation will likely decrease but not rapidly. Mester noted that the Fed's policy is well-positioned to address risks, with the flexibility to cut rates if the economy deteriorates or raise them if inflation does not improve as expected. She raised her estimate of the neutral rate, suggesting it might be higher than previously thought.

Looking at the Forex market, the GBP and the USD is ending the day as the strongest with the largest gains vs the JPY, NZD and AUD.

The strongest to the weakest of the major currencies

The EURUSD is ticking below the 100-hour MA as the day comes to a close after holding the MA support on a number of tests. That MA comes in at 1.0859. Sellers are making a play.

The GBPUSD moved up to test the low of a swing area between 1.2722 and 1.2735. That area remains key resistance going into the new day, but the price has already backed off and trades at 1.2704 going into the close

The USDJPY is switching to a new session high Moved away from the swing highs from Friday and earlier today 155.95. Think about that in the new day and extending higher could have the looking toward last week's high at 156.75 as the next key target.

Looking at the US at the market, yields moved higher by two – three basis points across the yield curve.

  • 2-year yield 4.849%, +2.5 basis points
  • 5-year yield 4.467%, +2.7 basis points
  • 10 year yield 4.447%, +2.7 basis points
  • 30-year yield 4.585%, +2.4 basis points

US stocks ended the session with mixed results. The Dow industrial average came off its 40,000+ record closing level on Friday. IT Elbowing close to 200 points, closing at 39806.76. The NASDAQ index saw the greatest flow of funds ahead of Nvidia's earnings on Wednesday. The NASDAQ index rose 108.91 points or 0.65% at 16794.87. That is a new all-time record close. The S&P index close up 4.86 points at 5308.12. That was just short of it's all time high close at 5308.14.