It was a good day to be a dollar bull, as the U.S. currency staged a steady climb across the board, even before top-tier U.S. reports were released.
But how did the rest of the financial markets perform?
Headlines:
- Chinese official manufacturing PMI for April: 50.4 (50.3 expected, 50.8 previous)
- Chinese official non-manufacturing PMI for April: 51.2 (52.3 expected, 53.0 previous)
- Chinese Caixin manufacturing PMI for April: 51.4 (51.0 expected, 51.1 previous)
- Japanese housing starts for March: -12.8% y/y (-7.6% expected, -8.2% previous)
- Swiss KOF economic barometer for April: 101.8 (102.1 expected, 100.4 previous)
- Eurozone headline CPI flash estimate for April: 2.4% y/y (2.4% expected, 2.4% previous)
- Eurozone core CPI flash estimate for April: 2.7% y/y (2.6% expected, 2.9% previous)
- Eurozone preliminary flash GDP for Q1 2024: 0.3% q/q (0.1% expected, 0.0% previous)
- Canadian GDP for February: 0.2% m/m (0.3% expected, 0.5% previous)
- U.S. employment cost index for Q1 2024: 1.2% q/q (1.0% expected, 0.9% previous)
- U.S. S&P composite house price index for March: 7.3% y/y (6.7% expected, 6.6% previous)
- Chicago PMI for April: 37.9 (44.9 expected, 41.4 previous)
- U.S. CB consumer confidence index for April: 97.0 (104.0 expected, 103.1 previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Risk assets appeared to have an off-day from the get-go, as crude oil and gold crawled lower while the safe-haven dollar climbed gradually during the Asian market hours. Bitcoin initially popped higher but was unable to hold on to its gains, as it staged a steady descent throughout the day.
Meanwhile, Treasury yields started pulling higher as the London session began, carrying on with its rally even after U.S. data came in mixed. The quarterly employment cost index reflected stronger price pressures with a 1.2% gain versus the projected 1.0% increase while the CB consumer confidence index fell short of estimates at 97.0 versus 104.0.
The S&P 500 index, on the other hand, turned lower likely on expectations that the upcoming FOMC decision would highlight sticky wage inflation and downplay easing plans after seeing strong employment cost data.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Major Currencies Chart by TradingView
The Greenback was off to a running start, as risk-off flows appeared to be in play for Asian session traders upon seeing mostly downbeat official Chinese PMI figures.
The euro managed to put up a good fight when preliminary GDP and CPI readings from the bloc turned out mostly stronger than expected, but profit-taking and dollar strength still forced EUR/USD to close out slightly in the red.
Mixed U.S. data did little to derail the dollar’s rally, as traders appeared to focus on the prospect of the FOMC highlighting sticky wage pressures from the higher than expected quarterly employment cost index.
Weaker than expected monthly GDP from Canada added downside pressure on the Loonie, but the Aussie and Kiwi still wound up weakest overall, as both ended up around 1.5% lower against the dollar.
Upcoming Potential Catalysts on the Economic Calendar:
- RBNZ Governor Orr’s speech at 1:00 am GMT
- U.S. ADP non-farm employment change at 12:15 pm GMT
- U.S. final manufacturing PMI at 1:45 pm GMT
- U.S. ISM manufacturing PMI at 2:00 pm GMT
- U.S. JOLTS job openings at 2:00 pm GMT
- FOMC monetary policy statement at 6:00 pm GMT
- FOMC press conference at 6:30 pm GMT
- BOC Governor Macklem’s speech at 8:15 pm GMT
- BOJ meeting minutes at 11:50 pm GMT
Price action might heat up at the start of the U.S. trading session, as Uncle Sam will be printing a fresh batch of leading jobs indicators that might be helpful clues for Friday’s NFP release.
However, the focus will likely be on the FOMC monetary policy decision later in the day, as well as Powell’s presser, as market players are keen to find out if the central bank’s stance has changed after seeing the latest round of growth and inflation data.
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