• Fed Chair Powell, when asked about the two hikes pencilled into the dot plot, responded "That's a pretty good guess of what will happen".
• Fed's Bostic (non-voter) said that rates should stay where they are for the rest of the year.
• APAC stocks were mostly lower following the tech-led declines on Wall St and with risk appetite also constrained by key holiday closures.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 -0.6% after the cash market closed down 0.5% yesterday.
• DXY remains supported by the 102 level, EUR/USD eyed 1.10 to the upside, cable hovers above 1.2750 pre-BoE.
• Looking ahead, highlights include US IJC, Existing Home Sales, EU Consumer Confidence (Flash), BoE, SNB, Norges, CBRT & Banxico announcements, Speeches from Fed's Powell, Bowman, Barkin & Waller, ECB's de Guindos & Panetta, SNB's Jordan & Norges Bank's Bache.

US TRADE

EQUITIES

• US stocks declined for the third consecutive day with the Nasdaq leading the losses in what many cited as pre-emptive month-/quarter-end flows providing a pullback in the absence of major catalysts, while markets also digested a slew of Fed rhetoric and hotter-than-expected UK CPI data which showed core inflation rose at its fastest pace since 1992.
• SPX -0.52% at 4,365, NDX -1.35% at 14,867, DJIA -0.30% at 33,951, RUT -0.20% at 1,863.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Chair Powell said the economy is very strong with a very strong labour market driving the economy and that inflation is moving down gradually. Powell also stated that while hiking rates can be painful, it slows demand and they want to get back to a place where inflation is low enough that people don't think about it. Furthermore, he said they have quite a ways to go but are making progress regarding the journey to price stability and when asked about the two hikes pencilled into the dot plot, he responded "That's a pretty good guess of what will happen".
• Fed's Goolsbee (voter) said the decision last week was a close call for him, while he is trying to work out if they have done enough and how much more needs to be done. Goolsbee added it is perfectly appropriate to have a reconnaissance mission now and he has not decided on the rate decision in July.
• Fed's Bostic (non-voter) said he wants to give the economy more time to adjust to rate hikes before doing more and said monetary policy has not been restrictive long enough for its effects to be felt, so it is prudent to wait. Bostic also commented in a Yahoo Finance interview that rates should stay where they are for the rest of the year and does not see a rate cut for most of 2024 but also noted that he will have to reconsider the position on rates if the economy does not slow down.
• US House is reportedly to vote on Biden impeachment resolution today, according to Axios.
• US federal court scheduled the initial appearance in the Hunter Biden case for July 26th, according to a CBS reporter.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower following the tech-led declines on Wall St and with risk appetite also constrained by key holiday closures with markets across the Greater China region shut for the Dragon Boat Festival.
• ASX 200 was pressured with weakness across all sectors and as tech conformed to the underperformance stateside.
• Nikkei 225 traded negatively but with the downside limited by recent currency weakness and after BoJ Board Member Noguchi echoed the central bank’s dovish tone in which he noted that the central bank’s new guidance is showing a strong commitment to patiently keeping easy policy and what's most important is to ensure momentum for wage growth becomes trend by maintaining easy policy.
• KOSPI was positive with the index underpinned by investment-related headlines including reports that European companies pledged investments in South Korea related to batteries, future cars and other cutting-edge industries.
• US equity futures were lacklustre overnight with price action contained ahead of today's various central bank updates.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 -0.6% after the cash market closed down 0.5% yesterday.

FX

• DXY languished near a floor at the 102.00 level after the prior day’s losses which some attributed to month/quarter-end positioning and despite the slew of Fed rhetoric which mostly continued to point to more work needed to bring inflation down, although there were later comments from Fed’s Bostic who called for a pause on rates and stated that he does not see a rate cut for most of 2024.
• EUR/USD held on to its gains after benefitting from a weaker dollar and edged closer to the 1.1000 handle.
• GBP/USD was rangebound after the prior day's fluctuations in the aftermath of the hot UK CPI data which spurred money market pricing of a near-coin flip between a 25bps or 50bps hike for today’s BoE meeting.
• USD/JPY was contained after failing to sustain a brief foray above 142.00 but with the pullback limited by dovish BoJ rhetoric.
• Antipodeans were lower alongside the subdued risk tone, holiday closure in China and mixed New Zealand trade data.
• Brazil Central Bank maintained the Selic rate at 13.75%, as expected, while it removed the reference to a possible resumption of the tightening cycle if the disinflationary process does not proceed as expected and said it will persevere with its policy until the consolidation of disinflation and anchoring of inflation expectations around its target. BCB said the current scenario demands patience and serenity in conducting monetary policy and stated that various measures of underlying inflation remain above the range compatible with meeting the inflation target, while it lowered its 2023 CPI forecast to 5.0% from 5.8% and cut its 2024 CPI forecast to 3.4% from 3.6%.
• BoC Minutes stated they agreed to assess the need for future rate hikes based on data after deciding to increase rates on June 7th and the GC felt Q2 growth was likely to be stronger than forecast in April.

FIXED INCOME

• 10yr UST futures traded rangebound following yesterday's two-way price action and eventual flat settlement as the early pressure from hot UK CPI data and higher oil prices was unwound by a solid 20yr auction and comments from Fed's Bostic who called for a pause on rates.
• Bund futures remained afloat but with upside capped after their recent whipsawing and absence of pertinent catalysts.
• 10yr JGB futures were lacklustre with only mild support seen after the firmer results from the latest 5yr JGB auction.

COMMODITIES

• Crude futures traded in a tight range alongside the subdued mood in risk assets and mixed private sector inventory data.
• US Energy Inventory Data (bbls): Crude -1.2mln (exp. +0.3mln), Gasoline +2.9mln (exp. +0.1mln), Distillate -0.3mln (exp. +0.7mln), Cushing +0.1mln.
• Russian gas flows through Ukraine could stop next year as the Ukrainian energy minister stated that a renewal of the five-year transit contract to supply Europe was unlikely, according to FT.
• Spot gold remained flat amid an uneventful dollar ahead of more Fed rhetoric and central bank decisions.
• Copper futures lacked direction owing to the cautious risk appetite and absence of its largest purchaser, China.

CRYPTO

• Bitcoin extended on this week's rally and climbed back above the USD 30,000 level.

NOTABLE ASIA-PAC HEADLINES

• China’s Commerce Minister said China is willing to push forward economic and trade ties with France.
• White House economic adviser Bernstein said he expects US relations with China will improve and also commented that where the US is now looks nothing like a recession.
• BoJ Board Member Noguchi said Japan's economy is to recover moderately and BoJ's new guidance is showing a strong commitment to patiently keeping easy policy, while he also noted that the global economy and markets are risks to Japan's economy. Furthermore, Noguchi said the shape of the yield curve is now smooth as a whole and what's most important is to ensure momentum for wage growth becomes a trend by maintaining easy policy.

DATA RECAP

• New Zealand Trade Balance (NZD)(May) 46.0M (Prev. 427.0M)
• New Zealand Exports (NZD)(May) 6.99B (Prev. 6.8B)
• New Zealand Imports (NZD)(May) 6.95B (Prev. 6.38B)

GEOPOLITICS

• US National Security Adviser Sullivan is to travel to Denmark this weekend to meet representatives from India, Brazil and other countries that have not condemned Russia's invasion of Ukraine in an effort to boost support for Kyiv, according to FT.
• US Coast Guard ship transited Taiwan Strait following Secretary of State Blinken's China visit, according to Reuters.

EU/UK

NOTABLE HEADLINES

• SNB Financial Stability Report: In the SNB’s view, going forward, banks should be required to prepare a minimum amount of assets that can be pledged at central banks. Inflation and interest rates should remain lower than in other advanced economies.