The U.S. dollar weakened against all the major currencies with the exception of the JPY. The day was void of any major economic releases in the US (or Canada).
The biggest decline came vs the AUD (-0.92%). Overnight, the Australia CPI came in higher than expectations (Y/Y 3.8% vs 3.7% exp; M/M 0.4% vs 0.3% exp). The RBA did raise rates earlier this month by 25 basis points to 3.85% after declines prior took the rate down from 4.35%. The NZDUSD rose 0.64% and GBPUSD rose by 0.50%.
The JPY lagged (rose 0.35%), pressured by expectations of looser near-term policy after PM Takaichi’s nominations to the BoJ board (considered dovish) . Short-end JGB yields fell on dovish policy prospects, while long-end yields rose on longer-term growth expectations. USDJPY briefly pushed to a high at 156.82 before easing back toward 156.43 curently.
The declines came despite firmer U.S. yields. Looking at the yield curve:
- 2 year yield rose 2.1 basis points to 3.4771%
- 5 year yield rose 3.0 basis points to 3.625%
- 10 year yield rose 2.3 basis points to 4.0557%
- 30 year yield rose 1.3 basis points to 4.702%
With the USD moving lower, the precious metals took their lead from it:
Gold rose $27.82 or 0.54% to $5170. That was near the midpoint of the day’s range.
Silver surged by $2.34 or 2.69% to $89.44. The high reached $91.29
Bitcoin also rebounded with a gain of $5371 r 9.33% at $69,393. For a technical review of Bitcoin CLICK HERE.
St. Louis Fed President Musalem said inflation remains nearly a full percentage point above the Fed’s target, underscoring the need to “finish the job” on price stability. While acknowledging that inflation could stay higher for longer, he emphasized that this is not his baseline expectation.
His base case calls for the economy to grow at or above 2%, supported by accommodative financial conditions, deregulation, and fiscal tailwinds. He noted that roughly half of the excess inflation can be attributed to tariffs, which he expects will fade as the year progresses.
On the labor market, Musalem described conditions as solid but vulnerable, particularly to a potential rise in layoffs.
He characterized current monetary policy as neutral and appropriately balanced. Bringing inflation back to target would support consumption, strengthen growth, and could help lower longer-term yields such as the 10-year rate.
Overall tone: balanced but cautiously constructive. While he is not signaling imminent easing, the comments suggest openness to rate cuts later in the year — provided inflation continues to move convincingly toward target.
US stocks ended the day with solid gains for the 2nd consecutive day ahead of the important Nvidia earnings:
- The gains were led by the NASDAQ index with a rise of 1.26%.
- The S&P index rose by 0.81% and
- The Dow industrial average rose by 0.63%.
- The Russell 2000 rose by 0.41%.
After hours Nvidia reported better than expected earnings:
Shares are up 2.42% in after hours trading after rising 1.41% on the day.
