The US dollar index gained more ground on Friday’s lead over Biden in the presidential debate, although it gave back some of its gains on healthy risk appetite. The index closed down 0.04% at 105.84 on Friday; It was around 0.04% for the week. Ten-year US yields rose 2.28% on the day at 4.38% and were up nearly 4% on the week. The two-year yield rose 0.20% on the week as it closed around 4.75%.
fedspeak
Fed officials continue to maintain a calibrated hawkish stance as they indicate they are in no rush to cut rates and want more evidence that inflation is essentially moving toward the Fed’s goal of 2%.
Data round-up
US Q1 GDP data (Q1 annual qoq final reading) matched forecasts of 1.4% and was higher than the initial estimate of 1.30% but personal consumption was lowered to 2% from 1.50% previously estimated. PCE deflator inflation data (May) released on Friday was in line with expectations, although the data showed the Fed’s preferred inflation metric eased from May. Personal income was better than expected but spending lagged. University of Michigan and CB confidence topped forecasts as inflation expectations eased. Weekly jobs and Chicago PMI data came out better than expected.
CPI inflation data from Australia, Japan and Canada, reported this week, were warmer than expected, threatening the disinflation theme.
Next week’s data and events
Traders await French Election, UK Election, JOLTs Job Openings, ISM Manufacturing, ISM Services and Nonfarm Payrolls report.
Outlook
The upcoming nonfarm payrolls report is expected to reflect a strong job market, based on regional Fed surveys and Conference Board confidence data. S&P Global US PMIs data remains strong; Thus, US ISM PMIs are expected to be strong. The French election results are likely to support the rise of far-right political ideology, which will be positive for the US dollar, although a fall in US yields is likely to dampen the impact to some extent. Fedspeak remains hawkish; Thus, Fed Chair Powell’s speech will be crucial. Inflation is proving sticky in developed economies. In this scenario, the yellow metal is expected to decline unless Powell turns unexpectedly dovish again. Short term selling in rallies is preferred.
Support is at $2300/$2277. Resistance is at $2350/$2370/$2385.
(The author is Associate Vice President, Fundamental Currencies and Commodities at Sherkhan by BNP Paribas)
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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