The DXY Index closed unchanged at 104.60 overnight, rebounding from the session’s low of 104.34 on an 8.5 bps increase in the US 10Y government bond yield to 4.55%, its highest level since May 2. The US Conference Board’s consumer confidence index defied expectations for a slowdown to 96 and rose to 102 in May; April was revised to 967.5 from 97. The Present Situation Index increased to 143.1 from 140, while the Expectations Index rose to 74.6 from 68.8. Although consumers assessed the current business conditions and short-term business outlook as slightly less positive in May, they were less negative about the labour market and its outlook. While consumers had a less negative assessment of their short-term income prospects, they considered their family’s current financial situation less positive from sticky inflation and higher rate hike expectations.
Beyond the headline improvements, the Board noted a possible increase in recession risks. For example, the Expectation Index held below 80 for a fourth month, the threshold typically associated with a recession ahead. The percentage of respondents who perceived a recession as likely over the next 12 months also increased for a second month to 70%, double the 35% in the CEO Confidence Survey. The &P 500 index fell as much as 0.4% during the session before turning up again to close the day unchanged at 5306.
Nevertheless, markets will be wary of more surprising US data like the consumer confidence index, e.g., tomorrow’s US GDP and initial jobless claims and Friday’s PCE deflators. The currencies that rebounded most will likely be vulnerable to profit-taking into the month-end this Friday, i.e., NZD, AUD, GBP, EUR, MYR, and KRW. However, DXY’s rebound from its 100-day moving average (104.35) could be limited to its 50-day moving average (105) unless the PCE deflators fail to slow on a month-on-month basis.
Quote of the day
“It is not the mountain we conquer but ourselves.”
Sir Edmund Hillary
29 May in history
Edmund Hillary and Tenzing Norgay became the first climbers to surmount Mount Everest in 1953.
Topic
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