Written Commentary
CURRENCY FUTURES
The June US dollar index was lower in overnight trade after falling below the 101 level Tuesday, as the weaker-than-expected April CPI report was bearish for the dollar, which fell against most major currencies.
Germany’s CPI inflation data came in line with expectations at a 0.4% month-over-month increase and a 2.1% annualized increase. Yesterday, Germany’s economic sentiment index jumped to 25.2 in May, well above the expected 11.9, reflecting growing optimism over the newly formed government, easing trade tensions, and stabilizing inflation. Eurozone GDP and industrial production figures will come out at 4:00 a.m. Central Time Thursday. June Euro futures are currently trading under $1.125.
The UK will report GDP, manufacturing, trade balance, and business investment figures at 1:00 a.m. central Thursday. June pound futures are trading above $1.33.
Japanese yen futures are higher as the dollar weakened. Month-over-month and yearly PPI readings both came in line with expectations.
The Australian wage index increased above expectations, with yearly growth at 3.4%, above expectations of 3.2%. Australia will report its unemployment rate at 8:30 p.m. Central Time.
INTEREST RATE MARKET FUTURES
Futures were higher across the curve in overnight trade after finishing lower on Tuesday. April CPI was slightly lower than expected, as signs of a potential inflationary impact from tariffs were largely missing. Annualized headline CPI inflation was 2.3%, the lowest reading since February 2021.
May and June will likely be when inflation pressures from tariffs become more evident in the economy as businesses run out of pre-tariff inventory. The readings suggest that inflation was cooling before tariffs were implemented, although their impact has yet to be seen. Despite the cooler reading, the inflation outlook remains unclear against the backdrop of tariffs and likely did not change the Federal Reserve’s views on pausing rate cuts for the time being. Markets are currently anticipating two 25 bps cuts this year, with the first cut coming at the September meeting.
The next major data regarding the economy will come Thursday with retail sales, industrial production, weekly jobless claims, and producer price index readings. Monthly PPI is expected to come in at 0.2%. Fed Chairman Jerome Powell will also speak Thursday, offering further insights into the economy.
The spread between the two-year and 10-year yields is 46 bps. The 10-year yield is slightly above 4.84%.
STOCK INDEX FUTURES
Stock index futures are little changed in overnight trade after finishing mixed on Tuesday as the S&P and Nasdaq both extended Monday’s gains while the Dow fell. The S&P has now recovered all of its YTD losses after Tuesday’s gains.
In a visit to Saudi Arabia, President Trump announced an economic partnership with Saudi Arabia worth more than $600 billion. The White House said the deals, while not all of them binding, are in artificial intelligence, tech, energy, and mining. President Trump also noted that he would lift sanctions on Syria, offering a financial lifeline to the country.
Weekly jobless claims, retail sales, the April producer price index, and the Philadelphia Fed manufacturing index will be released Thursday at 7:30 a.m. Central Time. Following this, at 8:15 a.m. Central Time, industrial production data will be published. Additionally, Federal Reserve Chair Powell is scheduled to give a speech at 7:40 a.m. Central Time on the same day.
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