US Data Weakness and Global Central Bank Signals Drive Market Movements

The latest financial market news reflects the impact of US macro data weakness and signals from global central banks, leading to significant market movements. As the US Federal Reserve contemplates a "skipped" rate hike, the dollar faces downward pressure. Meanwhile, concerns about pricing and premature tightening arise as the Bank of Japan emphasizes the importance of maintaining market trust. Additionally, Australia's plan to raise the minimum wage fuels expectations of accelerating wages and a potential rate hike. This article delves into the key factors driving today's markets and highlights the noteworthy price movements.

Key Factors for Today

• US macro data indicates weakness, suggesting a potential "skipped" rate hike and contributing to a decline in the dollar.
• Despite softer CPI, ECB President Christine Lagarde hints at a rate hike in June, expressing concerns about persistently high inflation in the Eurozone.
• The Bank of Japan emphasizes the importance of maintaining market trust by attaining the price goal and warns against premature tightening.
• Australia's government plans to raise the minimum wage, supporting the view of potential wage acceleration and a likely rate hike by the RBA.

Market Movers

• The US May ISM Manufacturing survey reveals contraction, with prices paid dropping unexpectedly to the lowest level in a year, aligning with the ADP report on slowing wage growth. These disinflationary results contribute to the idea of a "skipped" rate hike, resulting in a decline in the broader dollar index.
• The pound gains strength, experiencing a 5-day winning streak against the dollar as the currency index declines.
• Eurozone's inflation comes in below forecasts, but ECB President Lagarde maintains her stance on high inflation, hinting at an upcoming rate hike. EUR/USD witnesses an upside.
• The Japanese yen faces a decline amid BOJ Governor Kazuo Ueda's remarks on market trust, emphasizing the importance of maintaining the price goal and cautioning against premature tightening.
• The Australian dollar strengthens as the government announces a higher-than-expected increase in the minimum wage, reinforcing expectations of accelerating wages and a potential rate hike by the RBA.

Economic Calendar

• Nonfarm Payrolls
• Baker Hughes Oil Rig Count

US Data Weakness Supports "Skipped" Rate Hike Narrative

US macro data continues to exhibit weakness, particularly outside of job numbers. This reinforces the belief that the Federal Reserve may skip a rate hike at the upcoming meeting. The recent drop in prices paid, as indicated by the US May ISM Manufacturing survey, adds weight to this narrative. While the manufacturing survey came in slightly below expectations and in contraction, the unexpected decline in prices paid to the lowest level in a year supports the view of slowing wage growth. These disinflationary results contribute to the notion of a potential "skipped" rate hike in June and drive the broader dollar index lower.

Despite Eurozone inflation falling below forecasts, ECB President Christine Lagarde maintains her view that inflation remains too high and will persist for an extended period. The inflation rate of 6.1% (compared to the expected 6.3%) and core inflation softening to 5.3% (below the anticipated 5.6%) do not sway Lagarde's stance. She hints at a rate hike in the next meeting, underlining the ECB's worry about the worrisome inflation rate. As a result, the euro experiences a solid upside against the dollar, opening the door to further gains unless it breaches the base at $1.07.

BOJ Governor Kazuo Ueda emphasizes the significance of price stability in maintaining market trust. Ueda reiterates that reaching the inflation goal will take time and expresses concerns about premature tightening. These remarks reflect the BOJ's commitment to its price goal and imply a cautious approach to any tightening measures. The USD/JPY pair experiences a corrective phase, with potential support at 137.81.

Australia's government plans to raise the minimum wage by 5.25%, surpassing market expectations of a 5% increase. This development supports the anticipation of wage acceleration later in the year. The rise in wages also implies another rate hike by the Reserve Bank of Australia (RBA), solidifying the belief that a rate increase is "locked in." As a result, the Australian dollar climbs higher, with bulls eyeing resistance near $0.6626.