Dollar Lower, Stocks Advance on Thursday
02 June 2022
Thursday has brought nearly complete reversals of Wednesday's market moves as traders sold the USD after yesterday's rally, while stocks erased losses suffered in Wednesday's session.
Fed speakers remain hawkish
According to Atlanta Fed President Raphael Bostic, a possible halt in rate rises in September should not be seen as the central bank bailing out the markets. On the contrary, he stated that some of the economic uncertainties might be resolved by September and that, as a result, there could be a "substantial fall in inflation" this year.
On the other side, James Bullard believes it is too early to declare inflation has peaked and that a 50-basis-point raise each meeting is a "fine strategy" for the time being.
Following those comments, the USD strengthened, US yields rose, and equities declined. However, we see some reversals today as sentiment has improved during the EU session.
"In the last 48 hours or so, we've seen a reversal in declines in US Treasury yields, the 10 year is now back near 3%, equity markets have been struggling, and the US dollar strengthening. It's almost a mirror image of what we saw last week when there was talk of a possible pause in the tightening cycle." National Australia Bank head of foreign exchange strategy Ray Attrill told Reuters.
On Wednesday, the Bank of Canada raised interest rates by 50 basis points to 1.5 percent. Furthermore, to meet their 2% inflation objective, policymakers stated that they are willing to "act more firmly if necessary." The Canadian dollar slid, nevertheless, as the USD remained bid yesterday.
More US data today
Later today, the ADP employment report for May is due, predicted to improve slightly to 300,000 new jobs, up from 247,000 in April. Moreover, the usual Thursday's jobless claims are on the agenda.
Last but not least, US nonfarm productivity, along with factory orders, is on the agenda.