The USD is little changed vs the EUR, JPY and GBP to start the North American session. IN the video above, I take a look at the technicals that are defining the bias, the risk and the targets for those pairs ahead of the CPI data at 8:30 AM ET
In other developments, geopolitics remain in the forefront for traders and the markets. The US and Iran traded direct strikes overnight. After Iran downed a U.S. Apache helicopter over the Strait of Hormuz Monday (both crew rescued safely), the U.S. launched retaliatory strikes on Iranian military targets near the Strait. Iran hit back early Wednesday, with the IRGC launching missiles and drones at a U.S. base in Jordan (five missiles intercepted), the U.S. Fifth Fleet in Bahrain, and targets in Kuwait, while Saudi Arabia intercepted two cruise missiles and nine drones near Riyadh.
Meanwhile, Israel and Hezbollah traded fire overnight, with Israeli strikes south of Beirut killing six, and later hits on a hotel in suburban Beirut and a building in Baalbek.
Trump’s tone turned sharply negative on the peace deal. On Truth Social he posted: “Iran is all talk and no action. The Bully of the Middle East is DEAD!!! They’ve taken too long to negotiate a deal that would have been great for them, now they will have to pay the price!!!”. Recall from earlier this week, he reiterated that a deal was hours away.
Markets are still pricing containment: WTI is currently up about $1.78 at $89.90. That is up from the low for the day at $87.39. The high is at $90.42. Crude has underlying support from an eighth straight weekly inventory draw (-9.1M bbl per API).. Gasoline and cushion also fell
The EIA will release their numbers later today at 10:30 AM ET where the expectations are for crude to have a draw of -3.974M, gasoline to have a draw of -0.471M, and distillates to have a draw of -0.488M.
US stocks are on the defensive with the Nasdaq sharply lower after a volatile day of about 1200 points. Tne NASDAQ is down -447 points. The Dow industrial average is down -440 points, and the S&P index is down -72.65 points in premarket trading.
US bond yields are higher with the two-year up 1.5 basis points at 4.139%. The 10 year is up 1.0 basis points at 4.538%. The US treasury will auction off 10 year notes at 1 PM.
The key US release today will be at 8:30 AM ET, when the May CPI report will be announced. The key estimates are:
- Headline CPI is expected at +0.5% MoM versus +0.6% prior, with the YoY rate expected at +4.2% versus +3.8% prior.
- Core CPI is expected at +0.3% MoM versus +0.4% prior, with the YoY rate expected at +2.9% versus +2.8% prior.
The headline CPI has been above the 2% target since March 2021, while core YoY has been above that level since April 2021.
The Bank of Canada will announce its interest rate decision at 9:45 AM ET and is widely expected to leave its overnight rate unchanged at 2.25% for a fifth consecutive meeting. The central bank continues to balance persistent inflation concerns against signs of slowing economic growth and ongoing uncertainty surrounding trade negotiations and global geopolitical developments.
While financial markets have priced in some risk of additional tightening later this year, most economists expect the BoC to remain on hold through year-end as it evaluates the impact of the upcoming USMCA review, labor market conditions, and the broader economic outlook.
