The strongest to weakest of the major currencies

The USD is the strongest and the NZD continues to decline and is the weakest of the major currencies. Fitch has placed the U.S.'s "AAA" credit rating on negative watch due to the ongoing stalemate over the $31.4 trillion debt limit, sparking fears of a potential default. DBRS MorningStar is doing the same thing this morning. The warnings come as lawmakers continue to clash over spending plans, with no clear timeline set for a resolution. Politico reports this morning that while the gap has narrowed the two sides are "tens of billion dollars" apart. Punchbowl reported that US House Republican leadership expected the deal to be finalized by the weekend but that would be needed to be done today with the Memorial Day holiday approaching this weekend. This uncertainty has led to mixed results in U.S. stock futures as investors weigh the possible implications.

Meanwhile, minutes from the Federal Open Market Committee's May meeting yesterday suggested a possible pause to the Federal Reserve's interest rate hiking campaign.

After the close, Nvidia reported better-than-expected Q1 earnings driven by rising AI technology demand, causing a 24% surge in pre-market trading. They project forward guidance revenues to increase to $11B which was 50% (!) higher than analysts' expectations.

Lastly, oil prices declined following remarks by Russian Deputy PM Alexander Novak, who suggested that OPEC+ might not cut production at its upcoming meeting.

Ironically there is a flight into the relative safety of the USD(?). For the NZDUSD, the Reserve Bank of New Zealand cut rates by 25 basis points but there was some debate on whether to have no change. That sent the NZD sharply lower yesterday and that trend is continuing today

At the ECB, this morning policy member Villeroy has emphasized that the ECB should reach the peak rate in its next three meetings, suggesting a likely conclusion to the current cycle of interest rate hikes. He noted that the impact of these hikes might take longer to be felt in the economy compared to previous instances. He stated that current rates are unambiguously in a restrictive phase, signifying that they are intentionally high to slow down economic activity and curb inflation. Lastly, he mentioned that the ECB will closely monitor the pass-through effects of its "massive" previous rate hikes, acknowledging that they have already implemented strong measures to tighten monetary policy. Meanwhile, Nagel said that the ECB will continue to tighten to overcome elevated inflation and ECBs de Guindos said that wages and profits oppose upside risks to inflation

Overnight, Ueda said that he does not think the current balance sheet which consists of massive JGB's and ETF's is a normal one for a central bank. The BOJ Ueda said that the central bank is beginning to see good signs in the economy, but still some distance to stably and sustainably it inflation target. The Bank of Japan will patiently sustain an easy monetary policy.

UPDATED COMMENTS: Ueda says that the BOJ could tweak yield curve control if the balance between the benefit and cost of the policy shifts. One option could be shortening the duration of the bond yield the BOJ targets up to a 5-year zone (currently using a 10-year yield). Ueda does warn that the BOJ must avoid tightening prematurely and that the central bank should stick to it 2% target.

The latest economic data this morning from Europe show a slight contraction in Germany's GDP for the quarter at -0.3%, contrary to the expected 0.0%. Furthermore, the German consumer climate, as measured by the GfK index, also declined to -24.2, falling short of the expected -23.6. Meanwhile, the Confederation of British Industry (CBI) Realized Sales index in the UK recorded a disappointing -10, lower than the anticipated increase of 10, indicating a decline in retail sales volume. This data implies a somewhat subdued economic performance in these European nations.

Economic data expected at 8:30 AM ET in the U.S. this morning data includes the preliminary GDP for the quarter, forecasted at 1.1% growth, which aligns with the previous figure. The preliminary GDP Price Index, a measure of inflation, is expected to remain unchanged at 4.0% on a quarterly basis. The Unemployment Claims are projected to be 249K, slightly higher than the previous 242K, indicating a small rise in jobless claims. Finally, the U.S. Pending Home Sales on a monthly basis are projected to rise by 1.0%, a significant improvement from the previous drop of -5.2% (will be released at 10 AM ET)

A snapshot of the market currently shows:

  • Crude oil is down $1.43 or -1.91% at $72.91.
  • Gold is up $4.14 or 0.22% at $1961.27
  • Silver is down $0.01 or -0.06% at $23.04
  • bitcoin is trading at $26,341. It reached a new low for the week at $25,878 early today

in the premarket for US stocks, the major indices are mixed. Nvidia has sent the NASDAQ up sharply higher with its shares up 27% after beating earnings and lifting their forecasts for the current quarter to $11 billion. That was 50% higher than the analysts expectations:

In the European equity market, the major indices are marginally lower for the 4th consecutive day

  • German DAX is down -0.06%
  • Frances CAC is down -0.16%
  • UK's FTSE 100 is down -0.27%
  • Spain's Ibex is down -0.07%
  • Italy's FTSE MIB is down -0.15%

in the US at that market, yields are little changed:

  • 2 year yield 4.396% +1.5 basis points
  • 5 year yield 3.800% -2.2 basis points
  • 10 year yield 3.748% +0.2 basis points
  • 30 year yield 3.982% -0.6 basis points

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

European benchmark 10 year yields