The U.S. dollar was in rally mode against most of its major counterparts overnight.
Overview
The Japanese yen is the rare exception, gaining a modest 0.2% versus the buck. Overall, the Bloomberg Spot Dollar Index is up 0.3%.
Global equities are getting crushed today with the European Stoxx 600 down over 2.0%. American futures show that U.S. stocks will also suffer major losses when markets open. Nasdaq 100 contracts are down nearly 2.0% and S&P 500 futures are down about 1.5%. The sell-off comes after various central bankers from Europe and the United States issued fresh warnings on inflation and indicated they would take aggressive measures to fight it, even if that means risking a recession. The dollar has softened a touch over the past few minutes following a slew of economic data. Weekly jobless claims largely matched estimates. Personal incomes rose 0.5%, in line with expectations. However personal spending only rose 0.2% month over month in May, missing estimates of a 0.4% gain. The biggest piece of data was the PCE inflation print, the Fed’s favorite inflation measure. The PCE or personal consumption expenditures price index rose 0.6% from the month earlier. But the “core” reading only increased 0.3%, which was less than expected. A knee-jerk argument could be made that inflation may be turning a corner so the dollar weakened a touch.
What to Watch Today…
- No major economic events scheduled for today
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EUR
EUR/USD continued yesterday’s momentum and the Euro fell an additional half a percent against the greenback. The euro is now only three-tenths of a percent away from its year-to-day low versus the dollar. Looking through a wider lens, EUR/USD is approaching levels not seen since 2002. The European Consumer Price index is due out tomorrow morning and should be a doozy. Yesterday, European Central Bank President Christine Lagarde held a hawkish tone, causing traders to increase bets the ECB could hike more than the expected 25 basis point hike at next month’s meeting.
GBP
The British pound was also the victim of a surging U.S. dollar. The economic outlook for the British economy remains bleak. Data released this morning showed that U.K. household income is on its longest downward trend on record. Adjusted for inflation, disposable incomes dropped 0.2%, the fourth straight quarter of declines and the longest negative run since records began in 1955. The Bank of England expects the U.K. economy to contract this quarter putting policymakers in a tough spot trying to balance attacking inflation and a weakening economy.
