The dollar is broadly lower against the G10 today: -0.42% vs. EUR, -0.33% vs. SEK, -0.23% vs. JPY, and -0.20% vs. CHF and several sub-0.25% declines. The tug of war between economists and Fed officials over whether the Fed will cut rates this year was reignited by Blackrock’s updated forecast for two cuts. Fed Funds Futures are implying a 63.5% probability of a cut at the FOMC’s September meeting and a 78.8% probability of a cut at the December meeting. Several Fed members are scheduled to speak this week and will likely use the opportunity to tamp down rate cut expectations.
The primary focus of this week’s economic data is on Friday’s core PCE (personal consumption expenditure) deflator, the Fed’s favored inflation gauge. The month-over-month reading for May is forecast to drop to 0.1% (0.2% previous) which would mark its lowest point for the year. And the forecast for YoY core PCE is a decline to 2.6% (2.8% previous), continuing its uninterrupted string of declines since January 2023 and a fresh 2-year low.
Other key economic data includes Tuesday’s Consumer Confidence, Wednesday’s Mortgage Applications and New Home Sales, and Thursday’s 1Q GDP and Weekly Initial Jobless Claims.
Inflation data for Mexico (released this morning for mid-June) was higher than the previous in all categories and exceeded forecasts in weekly CPI (0.21% vs. 0.16% estimate) and YoY CPI (4.78% actual vs. 4.73% estimate).
Canadian CPI data for May is due for release tomorrow and is forecast to decline vs. the previous period in both categories (MoM & YoY).
USD/JPY traded to a 159.84 high on Friday and closed at 159.79, setting new daily and weekly closing records. Today the pair reached 159.92 before a flash selloff to 158.80. Trader’s nerves finally succumbed to fear of BoJ intervention, last seen at 160.03 on April 29th.
