See the latest Australian dollar analysis here:
DXY sagged overnight as oversold markets bounced:
The AUD dead cat bounced but it was very muted:
Commodities and EMs popped but, again, it’s so far weak:
The junk rebound is thoroughly unconvincing:
The curve steepened a touch:
Stocks did better than most:
Westpac has the wrap:
US existing home sales in May were in line with expectations at 5.41m (est. 5.40m, prior 5.60m from 5.61m). The Chicago Fed National Activity Index for May was barely above trend at +0.01 (est. +0.47, prior +0.40).
FOMC member Barkin said it should normalise “as fast as feasible”, with Inflation high, broad-based and persistent, and rates still “well below normal”. That said, he wants the Fed to tighten “without breaking anything.” He was comfortable with Chair Powell’s forward guidance of either a 50bp or 75bp hike at the next meeting.
ECB speakers continue to refer an effective fragmentation tool being designed that will be flexible. ECB’s Kazamir said a 50bp hike is probable in September.
BoE Chief Economist Pill repeated the BoE’s resolve to hike more aggressively to quell second round inflation effects. He also discussed the exchange rate and the large shocks to the UK economy as the spending power of households is being squeezed.
UK CBI Survey of Business Trends pulled back to a still very firm +18 (prior +21, est. unch.). However, the pullback in prices to +58 (from +75, est. unchanged, the record peak of 80.00 was in March) was a surprise. Rather than reflect easing of input pressures, CBI reported that it was in response to waning activity which had been persistently firm.
Aust: The Westpac-MI Leading Index should be consistent with above trend growth given a softening of partials in May.
NZ: The trade surplus should be supported by strength in dairy prices in May, matching similar oil price strength (Westpac f/c: $500mn).
Eur/UK: European consumer confidence is expected to remain weak in June as inflation continues to pressure spending and sentiment (market f/c: -21.5). Meanwhile, energy inflation should remain the key driver of UK consumer prices in May (market f/c: 0.7%).
US: FOMC Chair Powell will deliver a semi-annual monetary policy testimony before the Senate Banking Committee. The FOMC’s Barkin, Evans and Harker are also all due to speak.
Goldman sums it up:
Most bear markets end when economic conditions are still poor but there is a sense that they are no longer deteriorating at the same rate. In this context, we would argue that we have further to go, particularly on pricing potentially higher terminal rates and term premia in the bond markets. Even if eventually yields do not rise a lot further, it seems likely that the markets would at least price the risk that they will before we can see a genuine recovery. US financial conditions have tightened quickly, but are not tight by historical standards. This suggests either that rates need to rise further or markets need to price this risk (and de-rate further), which would tighten financial conditions anyway.
Hence a dead cat bounce that looks like it landed on a peat bog.