The strongest to the weakest of the major currencies

The JPY is the strongest and the NZD is the weakest as the North American session begins. The JPY was the weakest yesterday with declines of -0.36% to -0.68% vs the major currencies with the NZDJPY the biggest mover (to the upside). Today, the NZDJPY has retraced 0.62% and is the biggest mover (this time the pair moving lower). The RBNZ will meet tomorrow with the expectation of a 25 basis point hike (but with a tilt to another 50 BP surprise if there is one). Versus the USD, the JPY is little changed today in the morning snapshot. The USD is just behind the JPY as the 2nd strongest of the major currencies

. Written

Intense negotiations are underway in Washington to reach a deal to raise the U.S. debt ceiling, following a key meeting between President Biden and House Speaker Kevin McCarthy that did not result in an agreement, but was called "productive". While both sides remain at odds over spending plans, there is a shared optimism that a path to lifting the $31.4 trillion borrowing limit will be found. Nevertheless, there is pressure to reach a deal this week to avoid a damaging and unprecedented default. Treasury Secretary Janet Yellen has warned that the federal government could run out of money to pay its bills as early as June 1, causing anxiety amongst investors.

As talks continue, U.S. stock futures

are trading lower. Traders will also closely look toward the monthly U.S. S&P Global flash purchasing managers' index, which is expected to come in at 50.0 vs 50.2 last month. The service is expected at 52.6 vs 53.6 last month. The European flash estimates were released with mixed results.

In France, the Manufacturing Purchasing Managers' Index (PMI) was in line with expectations at 46.1, a slight improvement from the previous reading of 45.6. However, the French Services PMI fell short of the forecast, recording a value of 52.8 against the anticipated 54.0, and lower than the previous 54.6.

Germany's manufacturing sector underperformed, with the PMI dropping to 42.9, well below the forecasted 44.9 and the previous 44.5. On a more positive note, Germany's Services PMI outperformed expectations, registering at 57.8 against the anticipated 55.0, marking an improvement over the previous figure of 56.0.

In terms of the broader Eurozone, the Manufacturing PMI decreased to 44.6, falling short of the forecast of 45.9 and also lower than the previous 45.8. Conversely, the Eurozone Services PMI came in at 55.9, slightly above the forecast of 55.4, but marginally lower than the preceding 56.2.

Lastly, the UK's Manufacturing PMI came in slightly lower at 46.9, compared to the predicted 47.9, with a modest decrease from the previous 47.8. Also in the UK, the Services PMI fell to 55.1, underperforming against the forecast of 55.5 and recording a decrease from the previous 55.9.

Also in the UK today, Bank of England (BOE) Governor Andrew Bailey today indicated that inflation has "turned the corner" and that we are closer to the peak on interest rates. Bailey stressed the necessity of approaching rate hikes with caution, warning against trying to combat inflation with very severe rate increases. He acknowledged a challenge in communication and reported that services inflation is tracking in line with projections from February. Bailey reassured that the BOE stands ready to adjust the bank rate as necessary to return inflation to its medium-term target sustainably. Furthermore, he stated that if there were evidence of more persistent pressures, a further tightening of policy would be required. These comments were made on the eve of the UK's CPI data release, which is forecasted to show a significant decline in annual headline inflation. It is worth noting, however, that the expected decline for April in the UK mirrors the drop experienced by the Eurozone in March, primarily due to an adjustment in base effects following last year's significant surge in energy prices.

The US new home sales data for April will be released at 10 AM ET with expectations of 0.665M vs 0.683M. The Richmond Fed index will be released as well (-10 last month) at 10 AM ET. The Empire and Philly Fed indices came in weaker this month foreshadowing a weakening economy.

Meanwhile, stocks are lower after mixed results yesterday with the Dow up, S&P unchanged, and the Nasdaq lower. The S&P remains below the 4200 level which is not only a natural resistance target but also the 100-week MA this week. US yields are higher, helping to support the USD today.

A snapshot of the markets are showing:

  • Crude oil is trading up $0.89 or 1.24% at $72.94
  • Gold is trading down $8.38 or -0.44% at $1960.80
  • Silver is down $0.46 or -1.97% at $23.17
  • Bitcoin is trading at $27,355. That's higher than the near 5 PM level near $26,800

In the premarket for US stocks, the major indices are trading lower after mixed results yesterday:

  • Dow Industrial Average is down -76 points after yesterday's -140.05 point decline
  • S&P index is down -10.5 points after yesterday's 0.63 point rise
  • NASDAQ index is down 32 points after yesterday's 62.88 point rise

in the European equity markets the major indices are also lower with the exception of the UK FTSE 100:

  • German DAX -0.32%
  • Frances CAC -0.97%
  • UK's FTSE 100 +0.33%
  • Spain's Ibex -0.22%
  • Italy's FTSE MIB -0.48%

In the US debt market, yields are moving higher. The U.S. Treasury will auction off 2-year notes at 1 PM ET:

  • 2 year yield 4.375% +5.4 basis points
  • 5 year yield 3.806% +3.9 basis points
  • 10 year yield 3.741% +2.3 basis points
  • 30 year yield 3.983% +1.2 basis points

In the European debt market, the benchmark 10 year yields yields are higher:

European benchmark yields are higher