On the earnings front, Disney shares fell more than 9% after the company’s revenue missed forecasts. Returning to Kashkari’s words, it must be said that he in fact turned out to be still hawkish, reaffirming that the Fed should be more patient and maintain current rates for longer. He also admitted that in March he had foreseen up to two cuts in the cost of money, while now he is instead oriented towards just one reduction and perhaps even unchanged rates for the entire next six months.
On the data front, the US TIPP economic optimism index fell to 41.8 in May 2024, the lowest level in five months, from 43.2 in April and much worse than forecasts of 44.1. The Six-Month Economic Outlook, which measures how consumers perceive the economy’s outlook over the next six months, fell sharply to 35.7 from 38.8. Demonstrating that the next US data could very likely begin to mark pace, while Fed representatives still show great optimism about the future.
CURRENCIES
The statements of the Fed representatives fueled, last night, a rise in the dollar and an impulsive fall of all currencies against the greenback, after the close of the European markets. The euro fell to 1.0735 while the Cable even dropped to 1.2480 area, with the EurGbp rising above 0.8600. But the UsdJpy also broke 154.60 and climbed up to 155.15 20, demonstrating that the dollar still remains extremely strong precisely because of a Fed that does not want to listen to us, when it comes to cutting the cost of money and still seems “inflation oriented”, to put it plainly.
So we still expect alternating exchange rate movements, with possible accelerations of the greenback in the short term, and maximum attention to macro data, which will soon return to dominate the scene. Only a decline in the main aggregates could revive the sale of dollars and change the current trend, which still remains favorable to the US currency.
Meanwhile, more statements are emerging from Japan, after the JPY has started to fall again and the dollar has regained around half of the points lost during the intervention to support the JPY by the Boj. Japanese authorities continued to warn markets against extreme currency movements. Finance Minister Shunich Suzuki reiterated his warning that authorities are ready to respond to excessive exchange rate volatility, while Bank of Japan Governor Kazuo Ueda said he will study the impact of yen movements on inflation to guide political decisions.
PETROLIUM
WTI crude futures fell further, pushing prices towards $78 a barrel, the lowest level in two months, following reports that Russian Deputy Prime Minister Alexander Novak indicated that OPEC+ might take action. consideration of the increase in crude oil production. The group of major producers will meet on June 1 to decide on the production policy for the second half of the year.
The current supply agreement that takes about 2.2 million barrels per day off the market will expire at the end of June. Meanwhile, US crude inventories rose by 0.51 million barrels last week, defying market expectations for a decline of 1.43 million barrels. On the demand side, investors are looking ahead to the latest Chinese trade data to gauge the economic health of the world’s largest crude oil importer, on which price developments significantly depend.
Have a nice day and happy trading.
Saverio Berlinzani
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