The week ends quietly on the FOREX, with the $-Index unchanged at 105.88 this evening, but also on a weekly basis.
ends with a nice double gain for stock market indices, but also for Treasuries.
This is confirmed by symbolic differentials of +0.1% for the Euro at 1.0715, a Pound frozen at 1.264/$, and the Swiss Franc at 0.8987.
The only “difference” was made intraday by the yen, which set a new all-time low against a dollar that soared to 161.28 before returning to +0.1% at 160.90 (offsetting the erosion against the Euro).
As is often the case, the mountain gave birth to a smile, as the “PCE” – the annual inflation rate for the “US consumer basket” – fell by -0.1% as forecast, to 2.6% in unadjusted data.
Inflation fell by -0.2 points to 2.6% on an underlying basis (excluding energy and food), compared with an anticipated -0.1% decline (on a core basis).
The US 10-yr yield gave a very warm welcome to these figures, easing by -4pts to 4.2600% shortly after 2.30 p.m… but steam reversed at around 3 p.m. and the heaviness increased with each passing minute, so that the T-Bonds ended at their lowest point, with yields (+5Pts this Friday and +8Pts weekly) at their worst levels of the week, i.e. 4.34%, with the ’30-yr’ adding +6Pts to 4.487%.
The Commerce Department also reported that US household spending rose by 0.2% in May compared with the previous month, while incomes rose by 0.5% (more than expected).
It’s hard to say whether the majority of ‘optimists’ (58%) will continue to expect the Fed to cut rates after its September meeting, but strong growth and persistent inflation have called into question the idea that the Fed will make several rate cuts this year.
Forex traders are keeping a cool head against the Euro ahead of Sunday’s 1st round of French parliamentary elections.
‘If the latest polls are to be believed, the most likely scenario is that of a hung parliament with no dominant party’, say analysts at Danske Bank.
In such a context, the markets’ worst fears surrounding vast increases in budget spending should ease, as the new government will inevitably have to accept compromises in order to pass its bills’, stresses the Danish bank.
Forex traders have not reacted at all today to several statistics published in Europe this morning: French consumer spending on goods rebounded in May by 1.5% in volume terms (after -0.9% in April, a figure revised down 0.1 points on the initial estimate).
In addition, over one year, consumer prices in France are expected to rise by 2.1% in June 2024, down from 2.3% the previous month.
The same trend was observed in Spain, where inflation fell again in June, as announced by the National Statistics Institute (Ine) on Friday, mainly due to lower fuel prices.
But the political news in the United States also prompts caution, as Donald Trump seems to have been much more convincing than Joe Biden last night, in the first debate between the two main presidential candidates.
According to a CNN poll conducted overnight, Donald Trump has largely won this first televised duel ahead of the November election, with 67% of viewers giving him the victory against 33% for the outgoing president, who was judged to be tired and confused.
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