Daily Summary: a rate hike still on the table?

6:47 PM June 2, 2023

• Expectations for an interest rate hike by the Fed, primarily in July, have been growing, with the pricing reaching 25 basis points, driven by strong data from the US labor market.

• The NFP report showed a job growth of 339k, surpassing the expected 190k. However, the household survey-based unemployment report revealed an increase in the unemployment rate from 3.4% to 3.7%, which suggests the potential for keeping interest rates unchanged in June.

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• Wages are growing at a rate of 4.3% year-on-year, indicating a slight decline in wage pressure. The Thursday ISM report for the manufacturing industry showed a significant decrease in prices paid, suggesting a potential sharp decline in inflation for May.

• In response to the strong US data, we witnessed an increase in bond yields, a strengthening of the dollar, and a decline in gold prices. EURUSD is trading near 1.0700, although it previously tested levels around 1.0800.

• Gold dropped from around $1970 to $1950 per ounce.

• Bond yields rose sharply after Fitch indicated its negative outlook for US debt. Earlier, the Senate passed a bill to suspend the debt limit until 2025.

• Crude oil rebounded by 2% today, continuing its recovery, possibly related to expectations regarding the OPEC+ decision on production limits. However, it is expected that OPEC+ will not reduce the limit, although surprises similar to April cannot be ruled out.

• Additionally, oil is supported by news from China about a likely introduction of another stimulus package for the real estate market. Following this news, we saw a strong rebound in copper prices, but it was later neutralized due to the strengthening of the dollar.

• Despite the possibility of interest rate hikes, Wall Street continues its recovery. US100 is up 0.7%, US500 up 1.5%, and US30 up 2.0%.


EURUSD, H1 interval, source xStation 5

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