Macro-News round-up

πŸ”΅ As we shared yesterday on ATFX’s social networks and in the media, the a priori weak US inflation and retail sales data could be a good reason to cheer the stock markets. The monthly CPI rate came in at 0.3% in April, compared to 0.4% expected. Good news for the Federal Reserve. Also, US retail sales in April were flat at 0.0% versus 0.4% expected, and this could also be good news for the Fed, as the weaker the US economy looks, the more likely it is to cut rates in the future.

🟒 Indeed, since yesterday’s inflation and retail sales data, the US market has surged to new highs. SP500 futures are currently trading at new highs above 5,300 points. The NASDAQ100 also surpassed all-time highs.

πŸ’° The US 2-year bond yield fell below 4.75%, a support zone that it had managed to overcome when Jerome Powell ruled out rate cuts weeks ago. Paradoxically, weeks after Powell’s announcement that rates will remain at current levels for the time being, macro data are once again fueling the idea that a rate cut is finally on the cards, and the market is now discounting up to two rate cuts before the end of the year.

πŸ—£οΈ Tomorrow, Friday, the Fed’s Waller will speak, and the market will undoubtedly pay attention to any reference he may make regarding a possible change in the Fed’s strategy.

πŸ“ˆ European stock markets have also responded positively. The German DAX40 does not seem to be intimidated by the poor economic situation in Germany, and has broken new all-time highs approaching 19000 points at the moment.

πŸ’Έ As could be expected in this context, the dollar has weakened, losing 104.50 points, with 104 points as a possible support and next stop. Consequently, the EURUSD has continued to rise towards the 1.0875 level. However, in long term charts, we can see a large bearish channel formed since 2008, where the current levels would be close to the crest of that bullish channel.

🌍 Geopolitics:

πŸ‡ΊπŸ‡Έ US President Joe Biden and former President Donald Trump have agreed to two presidential debates, set for June 27 and September 10. The first debate will be hosted by CNN in Atlanta with no live audience. The second will be hosted by ABC. Years ago, according to a leak to the press, CNN provided questions in advanced to candidate Hillary Clinton before public debates with Trump. Trump wants more than two debates, including a debate before early voting starts in some states. Independent candidate Robert F. Kennedy Jr. claims he will meet criteria to participate in the June CNN debate.

πŸ’° The US Treasury Deputy Secretary sent a letter to Raiffeisen Bank International (RBI), an Austrian bank founded in 2010, expressing concerns about its presence in Russia and a scrapped $1.5 billion deal with a sanctioned Russian tycoon. The letter warned RBI’s access to the US financial system could be curbed if its activities in Russia contradict assurances it was winding down operations there. While many Western governments and firms have cut Russia ties since its Ukraine invasion, Austria remains linked via gas pipelines and as a hub for Russian money flows. The US is losing patience with “too much” Russian money flowing through Western banks like RBI, blunting sanctions effectiveness.

πŸ”« Yesterday Robert Fico, Prime Minister of Slovakia, was shot. The politician had made a strong opposition to the war in Ukraine with statements such as “the war in Ukraine started in 2014, not in 2022, when Ukrainian fascists killed Russian citizens in Ukraine”. There were 4-5 shots according to witnesses. Despite the seriousness of the injuries, the president is reportedly stable at the moment.